Question

Partnership Taxable Income Partner D is a 10 percent general partner in ABCD Partnership. The partnership’s financial records for the current tax year reveal the following:

Gross receipts from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $820,000

Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (540,000)

Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (93,000)

Net income from rental real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,000

Dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000

Business meals and entertainment . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,200)

Section 1231 loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,500)

D’s outside basis in his partnership interest was $125,000 at the beginning of the tax year.

1. calculate the partnership’s ordinary income/loss for the current tax year. Determine D’s capital account the partnership at the end of the tax year. Partnership Transactions: Partner and Partnership Partnership EFGH is a calendar year, accrual basis partnership. Partner G is a calendar year, cash basis partner.

Answer 1

SOLUTION:

Gross receipts from sale	820,000
Less: Cost of sales	-540,000
Gross profit	280,000
Less Operating expenses	-93,000
Business meals =$8,200 x 50%	4,100
Ordinary Income	182,900
Balance at the Beginning of the Year	125,000
Plus: Ordinary income	182,900
Plus: Rental Income	64,000
Plus: Dividend Income	20,000
Less Operating expenses	-17,500
D’s Allocation[10% * (182,900 + 64,000 + 20,000 - 17,500)]	24,940
D’s Capital at the end of the year (125,000 + 24,940)	149,400
Missing meals:
Beginning capital account	125,000
Share of Partnership income	18,290
Rental real estate income	6,400
Dividend income	2,000
Nondeductible meals and entertainment	-410
Section 1231 loss	-1,750
Ending capital account	149,530