Accounting Advance Federal Taxation homework help

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39.  In 2013, Tom and Missy form TM Partnership, Ltd. (an LLLP), to own and operate certain real estate. Tom contributed land, and Missy contributed cash to be used for setting up the entity and creating a plan for developing the property. Once a development plan was in place, the partnership sold interests in the partnership to investors to raise funds for constructing a shopping center. The partnership incurred expenses of $30,000 for forming the entity and $60,000 for starting the business (e.g., setting up the accounting systems, locating tenants, and negotiating leases). It also paid $5,000 in transfer taxes for changing the ownership of the property to the partnership’s name. The brokerage firm that sold the interests to the limited partners charged a 6% commission, which totaled $600,000. The calendar year partnership started business in November 2013. Describe how all of these initial expenses are treated by the partnership.

48. The KL Partnership is owned equally by Kayla and Lisa. Kayla’s basis is $20,000 at the beginning of the tax year. Lisa’s basis is $16,000 at the beginning of the year. KL reported the following income and expenses for the current tax year:

Sales revenue $150,000

Cost of sales 80,000

Distribution to Lisa 15,000

Depreciation expense 20,000

Utilities 14,000

Rent expense 18,000

Long-term capital gain 6,000

Payment to Mercy Hospital for Kayla’s medical expenses 12,000

a. Determine the ordinary partnership income and separately stated items for the partnership.

b. Calculate Kayla’s basis in her partnership interest at the end of the tax year. What items should Kayla report on her Federal income tax return?

c. Calculate Lisa’s basis in her partnership interest at the end of the tax year. What items should Lisa report on her Federal income tax return?

50. Suzy contributed business-related assets valued at $360,000 (basis of $200,000) in exchange for her 40% interest in the Suz-Anna Partnership. Anna contributed land and a building valued at $640,000 (basis of $380,000) in exchange for the remaining 60% interest. Anna’s property was encumbered by a qualified nonrecourse debt of $100,000, which was assumed by the partnership. The partnership reports the following income and expenses for the current tax year:

Sales $560,000

Utilities, salaries, and other operating expenses 360,000

Short-term capital gain 10,000

Tax-exempt interest income 4,000

Charitable contributions 8,000

Distribution to Suzy 10,000

Distribution to Anna 20,000

During the current tax year, Suz-Anna refinanced the land and building. At the end of the year, Suz-Anna had recourse debt of $100,000 for partnership accounts payable and qualified nonrecourse debt of $200,000.

a. What is Suzy’s basis after formation of the partnership? Anna’s basis?

b. What income and separately stated items does the partnership report on Suzy’s

Schedule K–1? What items does Suzy report on her tax return?

c. Assume that all partnership debts are shared proportionately. At the end of the tax year, what are Suzy’s basis and amount at risk in her partnership interest?


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(Top Tutor) Daniel C.
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School: UCLA
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