For the tax year, LMN partnership reported $66,500 ordinary loss and $28,500 increase in recourse liabilities for which the partners are liable. Natalie, a 50% owner, had an adjusted basis of $22,500 at the beginning of the year. What is Natalieâs allowable loss and her adjusted basis in LMN at the end of the year?
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Allowable loss: $19,000. Adjusted basis: $3,500. Allowable loss: $22,500. Adjusted basis: $0. Allowable loss: $33,250. Adjusted basis: $0. Allowable loss: $33,250. Adjusted basis: $3,500.
| For the tax year, LMN partnership reported $66,500 ordinary loss and $28,500 increase in recourse liabilities for which the partners are liable. Natalie, a 50% owner, had an adjusted basis of $22,500 at the beginning of the year. What is Natalieâs allowable loss and her adjusted basis in LMN at the end of the year? |
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| Allowable loss: $19,000. Adjusted basis: $3,500. | |
| Allowable loss: $22,500. Adjusted basis: $0. | |
| Allowable loss: $33,250. Adjusted basis: $0. | |
| Allowable loss: $33,250. Adjusted basis: $3,500. |
Related questions
The KL Partnership is owned equally by Kayla and Lisa. At the beginning of the year, Kaylaâs basis is $20,000 and Lisaâs basis is $16,000. Partnership debt did not change from the beginning to the end of the tax year. KL reported the following income and expenses for the current tax year.
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If required, use the minus sign to indicate an ordinary business loss. If an answer is zero, enter "0".
a. Prepare an Excel spreadsheet that could be used by a CPA firm to accumulate KLâs information that would be reported on Form 1065, page 1 [Ordinary business income (loss)] and page 4 (Schedule K).
Using your spreadsheet as a source document, answer the following.
How much is the partnershipâs ordinary business income (loss) on page 1?
$.
What amount is shown on lines 1, 9a and 20 on Schedule K?
Line 1: $
Line 9a: $ 6,000
Line 20: $
b. Use the ordering rules of Exhibit 21.2 (and the loss limitation rules), and calculate Kaylaâs basis in her partnership interest at the end of the year.
Basis before loss allocation: $
Ordinary loss allowed under § 704(d): $
Ending basis in interest: $
Based on this calculation, what does Kayla report on her tax return?
She reports a long-term capital gain of $$__ and ordinary income of $$_
Feedback
Partially correct
c. Use the ordering rules of Exhibit 21.2 (and the loss limitation rules), and calculate Lisa âs basis in her partnership interest at the end of the year.
Basis before loss allocation: $
Ordinary loss allowed under § 704(d): $
Ending basis in interest: $
Based on this calculation, what does Lisa report on her tax return?
She reports a long-term capital gain of $ and ordinary loss of $$
d. Do the amounts you calculated in part (b) and part (c) equal the amounts shown on your Excel spreadsheet?
Yes/NO , because the spreadsheet can only be used is use to determine amounts at the partner level as long as the loss is suspended .
At the beginning of the current? year, Barry and Irving formedthe BI Partnership by transferring cash and property to thepartnership in exchange for a partnership? interest, with eachhaving a? 50% interest.? Specifically,Barry transferred propertyhaving a $70,000 ?FMV, a $38,000 adjusted? basis, and subject to a$9,000 ?liability, which the partnership assumed.Irving contributed$35,000 cash to the partnership. The partnership also borrowed$32,000 from the bank to use in its operations. All liabilities arerecourse for which the partners have an equal economic risk ofloss. During the current? year, the partnership earned $26,000 ofnet ordinary income and reinvested this amount in new property.
a. | What is the? partnership's and each? partner's gain or lossrecognized on the formation of the? partnership? |
b. | What is each? partner's basis in his or her partnership interestat the end of the current? year? |
c. | For the? partnership, prepare a tax and book balance sheet atthe end of the current year. |
d. | Assume instead that Barry andIrving formed a corporation rather than a partnership. What is the?corporation's and each? shareholder's gain or loss recognized onthe formation of the? corporation? What is each? shareholder'sbasis in his or her stock at the end of the current? year? |
