Basis after formation of the partnership

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Problem: Suzy contributed assets valued at $360,000 (basis of $200,000) in exchange for her 40% interest in Suz-Anna GP (a general partner-ship). 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 a qualified nonrecourse debt 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, and other operating expenses

360,000

Short-term capital gain

10,000

Tax-exempt interest income

4,000

Charitable contributions

8,000

Distribution to Suzy

10,000

Distribution to Anna

20,000

During the current tax year, Suz-Anna refinanced the land and building. At the end of the year, Suz-Anna had recourse debt of $100,000 for partnership accounts payable and qualified nonrecourse debt of $200,000.

a. What is Suzy's basis after formation of the partnership? Anna's basis?

b. What income and separately stated item does the partnership report on Suzy's Schedule K-1? What items does Suzy report on her tax return?

Reference no: EM13858999

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