Natalie is a 40% partner in the modern partnership. Her basis in her partnership

Question

Natalie is a 40% partner in the modern partnership. Her basis in her partnership interest at the start of the year is $67,000. The partnership makes guaranteed payments of $21,000 to Natalie and reports partnership income of $80,000 including the guaranteed payments deduction. The partnership distributes $11,000 cash to Natalie during the year. What is Natalie’s recognized income from the partnership and what is her basis in her partnership interest after reflecting these partnership transactions?

Income $21,000, her basis is $109,000     

Income $88,000, her basis is $67,000     

Income $53,000, her basis is $88,000

Income $21,000, her basis is $67,000

Income $32,000, her basis is $88,000     

Explanation / Answer

Answer : Income $53,000, her basis is $88,000

Explanation

Income from Partership Firm

Guaranteed Payments $21,000

Add: Share of Profits 40% $32,000

(80000 X40%)

Income $53,000

Her basis in her partnership interest

Start of the year $67,000

Add: Share of Profit $32,000

Less: Cash Distributes -$11,000

Her basis end of the year $88,000

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