Question

Thomas and Jefferson are partners who share the profits and losses of the T&J Partnership 70% and 30%, respectively. The tax basis of each partner's interest in the partnership as of December 31 of last year was as follows: Thomas, $16,000; Jefferson, $14,000. During the current year, the partnership had ordinary income of $18,000 and a Section 123l loss of $5,000 from the sale of business property. During the year, the partnership distributed $16,000 of cash, proportionately to the two partners in accordance with their partnership interests. Calculate: Thomas' tax basis in his partnership interest on December 31 of the current year is . 2. Jefferson's tax basis in his partnership interest on December 31 of the current year is . 3. The amount of taxable income for items related to the partnership that Thomas will report on his current year tax return is . 4. The amount of taxable income for items related to the partnership that Jefferson will report on his current year tax return is .

Answer 1

Answer-

1. calculation of Thomas' tax basis in his partnership interest on December 31 of the current year is

His share in profit = $18000* 70% = 12600

His share in loss= 5000*70% = (3500)

Cash = 16000*70% = 11200

total tax base = $20300

2. calculation of efferson's tax basis in his partnership interest on December 31 of the current year is

His share in profit = $18000* 30% = 5400

His share in loss= 5000*30% = (1500)

Cash = 16000*30% = 4800

total tax base = $ 8700

3. The amount of taxable income for items related to the partnership that Thomas will report on his current year tax return is $ 20300

4.The amount of taxable income for items related to the partnership that Jefferson will report on his current year tax return is $8700