Reference no: EM132789639

The Greyjoy Partnership is equally owned by Theon and Yara. Theon's basis in his partnership interest including his share of partnership liabilities is $89,100 at the beginning of 2020 calendar tax year of the partnership. Yara's basis in her interest is $35,640 including her share of partnership liabilities.

Greyjoy reported the following income and expenses for its 2020 calendar tax year:

Income from services............................................................ $641,520
Guaranteed payment to Theon................................................. 320,760
Guaranteed payment to Yara.................................................... 213,840
Salaries to non-partner employees.............................................. 71,280
Depreciation expense................................................................ 64,152
Rent expense............................................................................ 71,280
Utilities expense....................................................................... 35,640
Tax-exempt interest income...................................................... 32,076
Dividend income...................................................................... 21,384
Charitable contributions.............................................................. 7,128
Political contributions............................................................... 14,256
Long-term capital loss............................................................... 17,820
Cash distribution to Theon on 12/31/2020.................................. 37,422
Cash distribution to Yara on 12/31/20........................................ 85,800

• The Greyjoy Partnership also increased its recourse liabilities by $26,400 during 2020 and that liability is allocated equally to the two partners.

Problem (a) Compute Greyjoy's ordinary income or loss from operations for its 2020 calendar tax year.

Problem (b) List any separately stated items passing for the equal partners.

Problem (c) Compute each partner's basis in their partnership interest at the end of 2020, showing any income or gain taxable to them, how the distributions are treated, and any losses or expenses that are deductible by them.