An examination of the RB Partnership’s tax books provides the following information for the current year:
Operating (ordinary) income before guaranteed payments $225,000
Long-term capital gain 4,000
Guaranteed payment to Barry 25,000
Cash distributions to each partner 30,000
Interest on Georgia state bonds (exempt interest income) 2,000
Interest paid on funds used to purchase Georgia state bonds 500
Charitable contributions made by partnership 4,000
Increase in partnership liabilities from 1/1-12/31 30,000
Barry is a 30% partner in partnership capital, profits, and losses. Assume the adjusted basis of his partnership interest is $50,000 at the beginning of the year, and he shares in 30% of the partnership liabilities for basis purposes.
a. What is Barry’s adjusted basis for the partnership interest at the end of the year?
b. How much income must Barry report on his tax return for the current year? What is the character of income?
This question was answered on: Sep 21, 2023
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