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Partnership Income and Partner's Basis

Keenie Beenie Partners has gross operating revenue of $400,000, cost of sales of %150,000, employee salaries of $40,000, a $25,000 Section 179 expense deduction, $10,000 of other depreciation, interest income of $3,000, a $4,000 capital loss, and a $600 charitable contribution deduction.

a. What are the partnership's bottom line net income and its separately stated items?

b. Kathleen is a 25% partner in Keenie Beenie Partners and receives no distributions from the partnership during the year. She has a $75,000 basis in her partnership interest at the end of the year after all income/loss items have been passed through to her. What was her beginning-of-the-year basis in her partnership interest?

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a. What are the partnership's bottom line net income and its separately stated items?

The partnership's bottom line is:

Gross operating revenue $400,000
Cost of sales ( 150,000)
Employee salaries ( 40,000)
Other depreciation ( 10,000)

Partnership net income $200,000

Separately stated items, taxed to the partners individually, will ...

Solution Summary

Citing authoritative sources, this solution illustrates how to compute a partnership's reported net income and separately stated items, and how to compute a partner's basis for tax purposes.

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