Suzy contributed business-related assets

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Suzy contributed business-related assets valued at $360,000 (basis of $200,000) in exchange for her 40% interest in the Suz-Anna Partnership. 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
Distributions 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 non-recourse debt of $200,000.
a. What is Suzy's basis 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 items does Suzy report on her tax return?
c. Assume that all partnerships debts are shared proportionally. At the end of the tax year, what are Suz's basis and amount at risk in her partnership interest?

Reference no: EM13509757

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