Reference no: EM133125690

Question - Grace, James, Helen, and Charles each owns an equal interest in GJHC Partnership, a calendar-year-end, cash-method entity. On January 1 of the current year, James's basis in his partnership interest is $85,750. For the taxable year, the partnership generates $90,000 of ordinary income and $37,200 of dividend income. For the first five months of the year, GJHC generates $23,500 of ordinary income and no dividend income. On June 1, James sells his partnership interest to Robert for a cash payment of $93,000. The partnership has the following assets and no liabilities at the sale date:

Required - Assuming GJHC's operating agreement provides that the proration method will be used to allocate income or loss when partners' interests change during the year, what is James's basis in his partnership interest on June 1 just prior to the sale?