Question

21. Joe Quick and Jane Reddy are equal partners in the Quick and Reddy partnership. On the first day of the current taxable year, Joe’s adjusted basis in his partnership interest is $10,000 and Jane’s adjusted basis is $2,000. During the year, Joe had withdrawals of $25,000 and Jane had withdrawals of $20,000. Given the following partnership activity for the year, determine each partner’s adjusted basis in Quick and Reddy at the end of the taxable year.

Answer 1

Solution: Their adjusted basis at the and of the taxable year can be determined as follows:

Joe Quick's adjusted basis = Beg. adjuted basis + Ordinary income + section 1231 gains + interest income - short-term capital loss - charitable contribution - Withdrawwals

= $10,000 + 30,000 + 500 + 250 - 1000 -1500 - 25,000

= $13,250

Jane Reddy's adjusted basis can be computed same as above:

thus, Jane Reddy's adjuted basis = $2,000 + 30,000 + 500 +250 - 1000 -1500 - 20,000

= $10,250

Note: Effects of the provided activities are given here equal since both partner has an equal interest in the partnership.