Reference no: EM132620641 , Length: 10

Partnership Taxation

This project covers general partnership basis issues including computation of partners' adjusted basis, determination of current-year tax position, preparation of tax forms, and creation of a memo to the partners with an analysis of their current-year tax issues and changes to basis.

In the current year, Mary, Andrew, and Paul formed Venezia General Partnership. Mary contributed $55,000 cash, Andrew contributed $55,000, and Paul contributed land with a cash basis of $70,000 and a fair market value of $180,000. The partnership assumed a $70,000 mortgage on the land; no partner is personally liable for the mortgage. At the end of the current year, Venezia made a $7,000 payment on the mortgage. Mary, Andrew, and Paul will split all profits and losses equally.

Current-year operations had the following results:

Sales revenue:                                                                                 $260,000
Cost of goods sold:                                                                           $205,000
Operating expenses:                                                                           $35,000
Long-term capital gains:                                                                       $1,200
Section 1231 Gains:                                                                               $450
Charitable contributions:                                                                         $350
Municipal bond interest:                                                                          $150
Salary paid as a guaranteed payment to Andrew (not included in expense):   $1,500

Part A: Determine Basis

Question 1: Using Thomson Reuters, find a court case discussing partners' basis in the partnership interest. Summarize the court case and tax law relating to basis calculations.

Question 2: Using the information summarized, determine Mary's, Andrew's, and Paul's initial basis in the partnership interest and the basis for each partner at the end of the current year. These calculations should be 1 page.

Part A Submission Requirements:

• Your summary of the court case, summary of tax law relating to basis calculations, and the specified partners' basis calculations should be 5 pages not including the required cover and reference pages. Note, the basis calculations should not be more than 1 page.
• Support your paper with at least 6 scholarly, legislative, or court references (of which the textbook may be one). 
• Format your paper according to the APA format

Part B: Tax Form Preparation

Question 3: Prepare Schedule K for the current year from page 4 of Form 1065.

Question 4: Prepare Andrew's Schedule K-1.

Part B Submission Requirements:

The tax forms required for Part B should be submitted as PDF documents.

Part C: Client Letter

Question 5: Prepare a letter to Andrew summarizing her current year tax issues.

Part C Submission Requirements:

Your letter should be 3 pages not including the required cover and reference pages.