Suzy contributed assets valued at $360,000 (basis of $200,000) in exchange for her 40% interest in Suz-Anna GP (a general part- nership in which both partners are active owners). Anna contributed land and a building valued at $640,000 (basis of $380,000) in exchange for the remaining 60% interest. Anna’s property was encumbered by qualified nonrecourse financing of $100,000, which was assumed by the partnership. The partnership reports the following income and expenses for the current tax year: Sales $560,000 Utilities, salaries, depreciation, and other operating expenses 360,000 Short-term capital gain 10,000 Tax-exempt interest income 4,000 Charitable contributions (cash) 8,000 Distribution to Suzy 10,000 Distribution to Anna 20,000 During the current tax year, Suz-Anna refinanced the land and building (i.e., the original $100,000 debt was repaid and replaced with new debt). At the end of the year, Suz-Anna held recourse debt of $100,000 for partnership accounts payable (recourse to the partnership but not personally guaranteed by either of the partners) and qualified nonrecourse financing of $200,000. a. What is Suzy’s basis in Suz-Anna after formation of the partnership? Anna’s basis? b. What income and separately stated items does the partnership report on Suzy’s Schedule K–1? What income, deduction, and taxes does Suzy report on her tax return? What additional information is needed?
Suzy contributed assets valued at $360,000 (basis of $200,000) in exchange for her 40% interest in Suz-Anna GP (a general part- nership in which both partners are active owners). Anna contributed land and a building valued at $640,000 (basis of $380,000) in exchange for the remaining 60% interest. Anna’s property was encumbered by qualified nonrecourse financing of $100,000, which was assumed by the
Sales $560,000
Utilities, salaries,
Short-term
Tax-exempt interest income 4,000
Charitable contributions (cash) 8,000
Distribution to Suzy 10,000
Distribution to Anna 20,000
During the current tax year, Suz-Anna refinanced the land and building (i.e., the original $100,000 debt was repaid and replaced with new debt). At the end of the year, Suz-Anna held recourse debt of $100,000 for partnership accounts payable (recourse to the partnership but not personally guaranteed by either of the partners) and qualified nonrecourse financing of $200,000.
a. What is Suzy’s basis in Suz-Anna after formation of the partnership? Anna’s basis?
b. What income and separately stated items does the partnership report on Suzy’s Schedule K–1? What income, deduction, and taxes does Suzy report on her tax return? What additional information is needed?
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