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RB Partnership: Basis and Taxable Items

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The RB Partnership is owned equally by Rob and Bob, Bob's basis is $14,000 at the beginning of the tax year. Rob's basis is $9,000 at the beginning of the year. RB reported the following income and expenses for the current tax year:

Sales revenue $130,000
Cost of sale 45,000
Guaranteed payment to Rob 24,000
Depreciation expense 12,500
Utilities 15,000
Rent expense 16,000
Interest income 3,000
Tax-exempt interest income 4,500
Payment to Mount Vernon Hospital for
Bob's medical expenses 10,000

a) Determine the ordinary partnership income and separately state items for the partnership
b) Calculate Bob's basis in his partnership interest at the end of the tax year. What items should Bob report on his Federal income tax return?
c) Calculate Rob's basis in his partnership interest at the end of the tax year. What items should Rob report on his Federal income tax return?

Solution Preview

The calculation of ordinary income: 130000 - 45000 - 24,000 - 12500 - 15000 - 16000 = 17500

Separately stated items are 3000, 4500, 10000 and the guaranteed payment of 24000

See Excel for a clearer presentation of partnership basis and reporting items

RB Partnership

Partner reporting items Rob Bob Total

Ordinary income 8,750 8,750 17,500
Guaranteed payment 24,000 24,000
Total ordinary income 32,750 8,750 41,500

Separately stated ...

Solution Summary

The solution explains which income/loss items are separately stated for the partners including a discussion about why they are separate. Basis calculations are included as part of the solution.

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