On January 1, 2021, Bob purchased a 50 percent interest in ABC Partnership (ABC) from Tim by paying Tim $150,000 in cash. During 2021, ABC had ordinary income totaling $180,000 and paid a penalty to the state of Virginia in the amount of $1,000. ABC, which does not have any liabilities, made a distribution to its partners on December 31, 2021 in the total amount of $50,000. The ABC partnership agreement requires all income, gains, and losses to be allocated between Bob and his partner based on ownership interest or 50/50. Required: 1. Calculate Bob's tax basis in ABC partnership interest on December 31, 2021. 2. If Bob sold his entire interest to Jack on January 1, 2022 for $200,000, calculate Bob's gain or loss on the sale assuming that ABC at the time of the sale did not have any “Hot Assets".
On January 1, 2021, Bob purchased a 50 percent interest in ABC Partnership (ABC) from Tim by paying Tim $150,000 in cash. During 2021, ABC had ordinary income totaling $180,000 and paid a penalty to the state of Virginia in the amount of $1,000. ABC, which does not have any liabilities, made a distribution to its partners on December 31, 2021 in the total amount of $50,000. The ABC partnership agreement requires all income, gains, and losses to be allocated between Bob and his partner based on ownership interest or 50/50. Required: 1. Calculate Bob's tax basis in ABC partnership interest on December 31, 2021. 2. If Bob sold his entire interest to Jack on January 1, 2022 for $200,000, calculate Bob's gain or loss on the sale assuming that ABC at the time of the sale did not have any “Hot Assets".
Chapter20: Corporations And Parterships
Section: Chapter Questions
Problem 58P
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Question
Transcribed Image Text:On January 1, 2021, Bob purchased a 50 percent interest in ABC Partnership (ABC) from Tim by paying Tim
$150,000 in cash. During 2021, ABC had ordinary income totaling $180,000 and paid a penalty to the state
of Virginia in the amount of $1,000. ABC, which does not have any liabilities, made a distribution to its
partners on December 31, 2021 in the total amount of $50,000. The ABC partnership agreement requires
all income, gains, and losses to be allocated between Bob and his partner based on ownership interest or
50/50.
Required:
1. Calculate Bob's tax basis in ABC partnership interest on December 31, 2021.
2. If Bob sold his entire interest to Jack on January 1, 2022 for $200,000, calculate Bob's gain or loss
on the sale assuming that ABC at the time of the sale did not have any "Hot Assets".
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