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Determination of Partner's Tax Basis

Joe Quick and Jane Reddy are equal partners in the Quick and Reddy partnership. On the first day of the current taxable year, Joe's adjusted basis in his partnership interest is $10,000 and Jane's adjusted basis is $2,000. During the year, Joe had withdrawals of $25,000 and Jane had withdrawals of $20,000. Given the following partnership activity for the year, determine each partner's adjusted basis in Quick and Reddy at the end of the taxable year.

Ordinary income........... $60,000
Section 1231 gains.........$1,000
Interest from Munipal Bonds..$500
Short-term capital losses....$2000
Charitable contributions.....$3000

Solution Preview

The partner's ending capital accounts are:

Joe Jane Total Reason

Beginning Balance $10,000 $ 2,000 $12,000
Ordinary Income ...

Solution Summary

This solution discusses how different items earned by a partnership affect a partner's tax basis. I have included references to the Internal Revenue Code.