Question

Kanye West, a partner with 33% profit interest, received his Schedule K-1 from Stronger LLP. At the beginning of the year, West’s tax basis in his partnership interest was $120,000. His current year Schedule K-1 reported an ordinary loss of $115,000, long-term capital gain of $15,000, qualified dividends of $35,000, $75,000 of non-deductible expenses, a $25,000 cash contribution, and a reduction of $50,000 in his share of partnership debt. What is West’s adjusted basis in Stronger LLP at the end of the year?

Answer 1

Particulars	Amount
Beginning basis	120,000
Ordinary loss	(115,000)
LTCG	15000
Dividends	35,000
Expenses	(75,000)
Contribution	25,000
Reduction in debt	(50,000)
Ending basis	(45,000)

Ending adjusted basis is $0. It cannot be negative.