Compute each partner\'s distributive share of ordinary business income. Compute

Question

Compute each partner's distributive share of ordinary business income. Compute each partner's self-employment income. How would you answers change if BG's profit was only $32,000 instead of $95,000? Zelda owns a 60 percent general interest in YZ Partnership. At the beginning of 2014, the adjusted basis in her YZ interest was $95, 000, For 2014, YZ generated a $210,000 business los, earned $14,600 dividend and interest income on its investment, and recognized a $6,200 capital gain, YZ made no distributions to its partners and had no debt. How much for her share of YZ's loss can Zelda deduct on her 2014 return? Compute Zelda's adjusted basis in her YZ interest at the end of 2014. Would your answers change if Zelda received a $5,000 cash distribution from YZ during 2014?

Explanation / Answer

Zelda opening adjusted Basis in partnership = 95000

Add: Share in Dividend = 8760 (14600 x 60 %)

Add: Share in Capital Gain = 3720 ( 6200 x 60 %)

total =107480

Less: Loss = 107480 ( maximum- as adjusted basis can be 0 but can not be negative)

a) Loss allowed in return will be 107480

b) Adjusted basis of capital will be nil at end of year 2015

c) yes Zelda received cash distribution of 5000 in year 2014 , Loss will futher be reduced to 102480 and Adjusted basis will remain to be nil

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