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Loose Leaf for Principles of Taxation for Business and Investment Planning 2019 Edition
22nd Edition
ISBN: 9781260161472
Author: Sally Jones, Shelley C. Rhoades-Catanach
Publisher: McGraw-Hill Education
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Chapter 10, Problem 15IRP
To determine
Identify the tax issue(s) and state each issue in question form.
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Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year. Aaron and Deanne each contributed $108,000 and Keon transferred an acre of undeveloped land to the partnership. The land had a tax basis of $72,000 and was appraised at $180,000. The land was also encumbered with a $72,000 nonrecourse mortgage for which no one was personally liable. All three partners agreed to split profits and losses equally. At the end of the first year, Blue Bell made a $6,300 principal payment on the mortgage. For the first year of operations, the partnership records disclosed the following information:
Sales revenue
$ 470,000
Cost of goods sold
450,000
Operating expenses
55,000
Long-term capital gains
2,100
§1231 gains
900
Charitable contributions
300
Municipal bond interest
300
Salary paid as a guaranteed payment to Deanne (not included in expenses)
3,000
a. Compute the adjusted basis of each partner’s interest in the partnership…
Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year. Aaron and Deanne each contributed $108,000 and Keon transferred an acre of undeveloped land to the partnership. The land had a tax basis of $72,000 and was appraised at $180,000. The land was also encumbered with a $72,000 nonrecourse mortgage for which no one was personally liable. All three partners agreed to split profits and losses equally. At the end of the first year, Blue Bell made a $6,300 principal payment on the mortgage. For the first year of operations, the partnership records disclosed the following information:
Sales revenue
$ 470,000
Cost of goods sold
450,000
Operating expenses
55,000
Long-term capital gains
2,100
§1231 gains
900
Charitable contributions
300
Municipal bond interest
300
Salary paid as a guaranteed payment to Deanne (not included in expenses)
3,000
Compute the adjusted basis of each partner’s interest in the partnership…
.
Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year. Aaron and Deanne each contributed $110,000 and Keon transferred an acre of undeveloped land to the partnership. The land had a tax basis of $70,000 and was appraised at $180,000. The land was also encumbered with a $70,000 nonrecourse mortgage for which no one was personally liable. All three partners agreed to split profits and losses equally. Blue Bell made a $7,000 principal payment on the mortgage at the end of the first year. For the first year of operations, the partnership records disclosed the following information: Sales revenue $ 470,000 Cost of goods sold $ 410,000 Operating expenses $ 70,000 Long-term capital gains $ 2,400 §1231 gains $ 900 Charitable contributions $ 300 Municipal bond interest $ 300 Salary paid as a guaranteed payment to Deanne (not included in expenses) $ 3,000
What is the Qualified nonrecourse debt for Deanne and why.
Chapter 10 Solutions
Loose Leaf for Principles of Taxation for Business and Investment Planning 2019 Edition
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