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Mark is a 50% partner in Apex Partnership. Mark and Apex have calendar tax years. Mark’s...

Mark is a 50% partner in Apex Partnership. Mark and Apex have calendar tax years. Mark’s basis in his Apex interest is $10,000 on January 1, 2019. Mark contributed equipment, FMV $40,000, basis $15,000 on February 1, 2019. Apex had bank liabilities of $30,000 on Jan. 1, 2019 and bank liabilities of $70,000 on December 31, 2019. Mark received a $50,000 cash distribution from Apex on August 1, 2019. Apex had business income of $30,000 and tax-exempt interest income of $10,000 in 2019.

  1. How much federal income tax will Apex pay for 2019? _____________________
  2. What is Mark’s basis on December 31, 2019? ____________________
  3. How much taxable income did Mark have for 2019? ____________________
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Answer #1

Required a

Partnerships do not pay income taxes, but are required to file anual information returns reporting income and the allocation of that income to the various partners.

Therefore, Apex would not pay any federal income tax for 2019.

Required b.

Opening basis $10,000
Contribution $15,000
% income $15,000
% tax exempt income $5,000
Distribution received ($50,000)
Partner's % of partnership liability $20,000
Closing Basis $15,000

Required c

Mark's taxable income = 50% of 30,000 = $15,000

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