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Partnership Tax. Partnerships
1. Pete is a 1/3 partner in an LLP. Pete the following transactions. He contributed land worth
$30,000 (basis $20,000) and services worth $20,000. First year: partnership borrowed $30,000
and had undistributed income of $30,000. Second year: partnership distributed cash to Pete of
$20,000 and paid off the loan. Show and explain your calculation.
The value of the land is $30,000 & Pete’s basis for partnership interest is 1/3 ($30,000) partner in
an LLP. However adjusted basis of land worth is $10,000.
Hence when land takes over land worth as a distribution, his basis for partnership is reduced by
$20,000. Hence his revised basis for partnership interest would be $20,000 ($15,000 - $10,000).
Here is the calculation:
= $30000 – 1/3(30000)
= $30000- $10000
If the land worth had been worth $30,000, still revised basis for partnership interest would be
$10,000 ($20,000 - $10,000), because the gain on current distribution is calculated basis the
adjusted basis of the asset & not the Fair market Value. However, the capital account of A would
be reduced by $20,000 & $30,000 each in respective above cases.
2. Explain the tax consequences of four separately stated income/loss/deduction in the 10...
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