Problem: Module 7 Textbook Problem 8 Learning Objective: 7-6 Adjust the tax basis in a partnership interest On January 1, Year 1, Radish, an individual, paid $15,000 for 5 percent of the stock in Root Corp., an S corporation. In November Year 1, he loaned $8,000 to Root Corp. in return for a promissory note. Root Corp. generated a $600,000 operating loss in Year 1. Root Corp. generated $220,000 ordinary business income in Year 2. In Year 3, Root Corp. repaid its $8,000 debt to Radish before he restored any basis in the debt. Required: How much gain or loss, if any, will Radish recognize as a result of the debt repayment in Year 3? Gain Answer is complete but not entirely correct. $ 8,000

Problem: Module 7 Textbook Problem 8 Learning Objective: 7-6 Adjust the tax basis in a partnership interest On January 1, Year 1, Radish, an individual, paid $15,000 for 5 percent of the stock in Root Corp., an S corporation. In November Year 1, he loaned $8,000 to Root Corp. in return for a promissory note. Root Corp. generated a $600,000 operating loss in Year 1. Root Corp. generated $220,000 ordinary business income in Year 2. In Year 3, Root Corp. repaid its $8,000 debt to Radish before he restored any basis in the debt. Required: How much gain or loss, if any, will Radish recognize as a result of the debt repayment in Year 3? Gain Answer is complete but not entirely correct. $ 8,000

Accounting (Text Only)

26th Edition

ISBN:9781285743615

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter12: Accounting For Partnerships And Limited Liability Companies

Section: Chapter Questions

Problem 12.3APE

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Exercise 10-16 (Algorithmic) (LO. 2) Enercio contributes $195,800 in exchange for a 40% interest in the calendar year ABC LLC, which is taxed as a partnership. This year, the LLC generates $156,640 of ordinary taxable income and has no separately stated income or expenses. Enercio withdrew $19,580 from the partnership during the year. If an amount is zero, enter "0". Enercio is taxed on what amount of ABC's income?$fill in the blank 1 How much of the $19,580 withdraw will Enercio be taxed?$fill in the blank 2
Exercise 10-15 (Algorithmic) (LO. 2) Enercio contributes $268,400 in exchange for a 40% interest in the calendar year ABC LLC, which is taxed as a partnership. This year, the LLC generates $214,720 of ordinary taxable income and has no separately stated income or expenses. Enercio withdrew $26,840 from the partnership during the year. If an amount is zero, enter "0". Enercio is taxed on what amount of ABC's income?$_________ How much of the $26,840 withdraw will Enercio be taxed? $_________
Problem 10-32 (LO 10-1) (Algo) Skip to question [The following information applies to the questions displayed below.] Allison, Keesha, and Steven each owns an equal interest in KAS Partnership, a calendar-year-end, cash-method entity. On January 1 of the current year, Steven's basis in his partnership interest is $32,000. During January and February, the partnership generates $36,600 of ordinary income and $6,060 of tax-exempt income. On March 1, Steven sells his partnership interest to Juan for a cash payment of $56,000. The partnership has the following assets and no liabilities at the sale date: Tax Basis FMV Cash $ 40,000 $ 40,000 Land held for investment 40,000 80,000 Totals $ 80,000 $ 120,000 Problem 10-32 Part a (Algo) a. Assuming KAS's operating agreement provides for an interim closing of the books when partners' interests change during the year, what is Steven's basis in his partnership interest on March 1 just prior to the sale?
Problem 14-23 (LO. 5, 6) The BCD Partnership plans to distribute cash of $20,000 to partner Barb at the end of the tax year. The partnership reported a loss for the year, and Barb's share of the loss is $10,000. Barb holds a basis of $15,000 in the partnership interest, including her share of partnership liabilities. The partnership expects to report substantial income in future years. If an amount is zero, "0". a. Generally, in what order are the allocated items applied for calculating Barb's ending basis in the BCD Partnership interest? • Losses may be deducted under § 704(d). • Distributions from the partnership decrease basis. • Contributions and income items increase the basis. • Allocation of deductions. b. As a result of the $20,000 distribution, Barb's basis is $fill in the blank d98d8cf89ff4fe3_1 and reports a $fill in the blank d98d8cf89ff4fe3_2 for the tax year due to the distribution. c. How will the deduction…
Exercise 15-16 (Algorithmic) (LO. 3, 4) Charlotte is a partner in, and sales manager for, CD Partners, a domestic business that is not a "specified services" business. During the tax year, she receives guaranteed payments of $174,200 from CD Partners for her services to the partnership as its sales manager. In addition, her distributive share of CD Partners' ordinary income (its only item of income or loss) was $104,520. What is Charlotte's qualified business income? Feedback: At its most basic level, § 199A permits an individual to deduct 20 percent of the qualified business income generated through a sole proprietorship, a partnership, or an S corporation. Qualified business income (QBI) is defined as the ordinary income less ordinary deductions a taxpayer earns from a “qualified trade or business” conducted in the United States by the taxpayer (e.g., from a sole proprietorship). It also includes the distributive share of these amounts from each partnership or S corporation interest…
Problem 11-51 (a) (LO. 2, 3, 5, 7) Gabriel, an accountant, earns $360,000 from his practice. He also receives $9,100 in dividends and interest from various portfolio investments. During the year, he pays $85,000 to acquire a 15% interest in a partnership that produces a $120,000 loss. In addition, he has a $12,000 passive income from other sources. Compute Gabriel's AGI assuming that: a. He does not participate in the operations of the partnership. In this case, Gabriel's AGI is $fill in the blank f46766ff1f8af84_1. Problem 11-53 (a) (LO. 3, 8) Several years ago Otto acquired an apartment building that currently generates a loss of $49,000. He has AGI of $155,000 before considering the loss. Otto is not an active participant in the activity. Complete the paragraph below explaining what effect the loss will have on his AGI. The activity is activity, and Otto is not an active participant. Therefore, deduction is allowed under the real estate rental exception. The $49,000…
Chapter 3 – Partnership Operation (Division of Profit or Loss) Bruce and Rachel agree to form a partnership on July 1, 2020. Bruce, who has been trading as a sole proprietor, will invest certain business assets at agreed valuations, transfer his business liabilities and contribute sufficient cash to bring his total contribution to a 60% interest over the new business. Details of Bruce’s assets and liabilities are given below. Book value Agreed value Accounts receivable P 32,000 P 30,000 Inventory 240,000 138,000 Equipment 322,000 240,000 Accounts payable 200,000 200,000 Notes payable 14,000 14,000 Rachel agrees to bring in inventory with a value of P146,500 and P93,500 in cash for a 40% interest in the partnership. The partners have agreed on the following: 1. Capital accounts will remain fixed 2. 12% interest profit computed on capital 3. Salaries of P30,000 each for 2020 but will be twice this amount next year and thereafter; 4. 10% interest charge on partners’ drawings made beyond…
Chapter 3 – Partnership Operation (Division of Profit or Loss) Bruce and Rachel agree to form a partnership on July 1, 2020. Bruce, who has been trading as a sole proprietor, will invest certain business assets at agreed valuations, transfer his business liabilities and contribute sufficient cash to bring his total contribution to a 60% interest over the new business. Details of Bruce’s assets and liabilities are given below. Book value Agreed value Accounts receivable P 32,000 P 30,000 Inventory 240,000 138,000 Equipment 322,000 240,000 Accounts payable 200,000 200,000 Notes payable 14,000 14,000 Rachel agrees to bring in inventory with a value of P146,500 and P93,500 in cash for a 40% interest in the partnership. The partners have agreed on the following: 1. Capital accounts will remain fixed 2. 12% interest profit computed on capital 3. Salaries of P30,000 each for 2020 but will be twice this amount next year and thereafter; 4. 10% interest charge on partners’ drawings made beyond…
Hw.58. Mercedes a calendar year tax payer is a 40% general partner in a calendar year cash basis partnership. For the current year department should receive 160,000 gross revenues from services rendered and paid the following amounts: we expense 28,500 salary to employees 53 800 guaranteed payment to Mercedes 33,300 cash distributions to partner 18,000 payment for accounting services 7200. Mercedes share of income from the partnership for the current year is A. 33300 B. 40980 C. 14880 D. 48180
Ma3. Partner's tax basis in his partnership interest at the beginning of the year was $10,000. For the year, Partner's share of the partnership liabilities increased by $1.000. Also for the year, Partner was allocated $2,000 in ordinary business income, $500 of interest income, and $1,000 of tax-exempt income Finally, Partner received cash distributions of $3,000 during the year. Determine Partner's tax basis in his partnership interest at the end of the year. Type your answer
Problem 3. The A,B,C partnership agreement specifies that partnership net income be allocated as follows: A B C Salary allowance P30,000 P10,000 P40,000Interest on ave. capital balance 10% 10% 10% Remainder 40% 40% 20% The average capital balances for the current year were P50,000 for A, P30,000 for B, and P20,000 FOR c. Assuming a current year net income of P150,000, what amount should be allocated to each partner? Assuming a current year net income of P50,000, what amount should be allocated to each partner?
V1. The Beale Gardens Partnership has four general partners. Each partner's Schedule K-1 for the tax year showed a $36,000 loss and an increase in liabilities of $10,000. Which partner will have their loss limited by the basis limitation? Christine. Her beginning basis was $10,000, and she contributed $18,000 in cash during the tax year. Edith. Her beginning basis was $36,000, and she took an $11,000 cash distribution during the tax year. Jacqueline. Her beginning basis was $25,000, and she contributed $2,000 in cash during the tax year. Joseph. His beginning basis was $50,000, and he took a $20,000 cash distribution during the tax year.