At the beginning of the year, Qi’Ra’s capital account balance in the Corellia Pa

ID: 2530015 • Letter: A

Question

At the beginning of the year, Qi’Ra’s capital account balance in the Corellia Partnership was $75,000. During the tax year, Qi’Ra contributed property with a basis of $10,000 and a fair market value of $15,000. Her share of the partnership’s ordinary income and separately stated income and deduction items was $50,000. At the end of the year, the partnership distributed $20,000 of cash to Qi’Ra. In addition, the partnership allocated $16,000 of recourse debt and $12,000 of nonrecourse debt to Qi’Ra. What is Qi’ra’s ending capital account balance?

Explanation / Answer

Particulars

Amount ($)

Opening capital balance of Qi' Ra'

75000

Add: allocation of income and contributions

Fair value of property contributed

15000

Share of ordinary and separate income

50000

Allocation of recourse debt

16000

Allocation of non-recourse debt

12000

93000

Capital before adjustment of distributions (75000+93000)

168000

Less: distribution of cash by the partnership

20000

Closing capital balance of Qi' Ra (168000 -20000)

148000