24. At the beginning of 2017, Margaret’s adjusted basis in her 50 percent intere

Question

24.        At the beginning of 2017, Margaret’s adjusted basis in her 50 percent interest in MP Partnership, a calendar year general partnership, was $10,000. During 2017, Margaret did not make any additional contributions to MP Partnership, and Margaret’s share of MP Partnership liabilities did not change. During 2017, MP Partnership distributed $5,000 to Margaret, and MP Partnership had the following items of partnership income, deduction, gain and loss for 2017:

Nonseparately stated taxable income                    $30,000

Tax-exempt interest                                          $10,000

Capital loss                                                                   ($20,000)

What is Margaret’s adjusted basis in her partnership interest in MP Partnership at the end of 2017?

a.         0.

b.         $10,000.

c.          $15,000.

d.         $25,000.

Explanation / Answer

Ans. Margaret's adjusted basis in her partnership interest MP partnership at the end of 2017 is as under:-

Opening balance of Margaret's basis = $10000

Less : Amount distributed = ($5000)

Add: Share of partnership taxable income(50% of $30000) = $15000

So in this case option C is correct

Add: Share in tax exempt income(50% of $10000) = $5000

Less: Share in Capital loss (50% of $20000) = ($10000)

Margaret's adjusted basis at end of 2017 = $15000

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