At the beginning of Year 1 Ms. Mushroom, an individual, purchased a 20 percent interest in Fungi Partnership for $22,000. Ms. Mushroom's Schedule K-1 reported that her share of Fungi's debt at year-end was $29,000, and her share of ordinary loss was $46,600. On January 1, Year 2, Ms. Mushroom sold her interest to another partner for $3,700 cash. Required:
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- Problem: Module 7 Textbook Problem 5 Learning Objectives: . 7-6 Adjust the tax basis in a partnership interest . 7-7 Apply the basis limitation on the deduction of partnership losses This year, individual Kale and individual Spinach formed Leafy Green Partnership. Kale contributed $50,500 cash, and Spinach contributed business assets with a $50,500 FMV. Spinach's adjusted basis in these assets was only $10,100. The partnership agreement provides that income and loss will be divided equally between the two partners. Partnership operations for the year generated a $48,400 loss. Required: How much loss may each partner deduct currently, and what basis will each partner have in her interest at the beginning of next year? Determine the loss each partner can deduct currently considering the basis loss limitation, but no other loss limitations. (Losses and deductions should be entered as negative numbers.) Initial basis in partnership interest Deduction for share of partnership loss Adjusted…Problem: Module 7 Textbook Problem 3 Learning Objectives: • 7-5 Differentiate between a distributive share of partnership income and cash flow • 7-6 Adjust the tax basis in a partnership interest Garlic, an individual, is a limited partner in Onion Partnership. This year, Garlic's share of partnership ordinary income is $20,000, and she received a cash distribution of $30,000. Garlic's tax basis in her partnership interest at the beginning of the year was $50,000. Her marginal tax rate is 22 percent. Garlic qualifies for the QBI deduction, without regard to any limitations on this QBI deduction. Required: a. Calculate the tax cost of Garlic's partnership earnings this year. Tax cost b. Compute Garlic's after-tax cash flow from her partnership activity this year. After-tax cash flow c. Compute Garlic's tax basis in her partnership interest at the ending of the year. Assume no change in her share of partnership liabilities during the year. Tax basis at the end of the yearProblem: Module 7 Textbook Problem 6 Learning Objectives: . 7-6 Adjust the tax basis in a partnership interest 7-7 Apply the basis limitation on the deduction of partnership losses On January 1, Year 1, Carrot, an individual, paid $24,100 for 5 percent of the stock in Root Corp., an S corporation. In November, he loaned $12,950 to Root Corp. in return for a promissory note. Root Corp. generated a $920,000 operating loss in Year 1. Required: a. How much of his share of the loss can Carrot deduct on his Year 1 return? b. Compute Carrot's basis in his Root Corp. stock and his Root Corp. note at the end of Year 1. Complete this question by entering your answers in the tabs below. Required A Required B How much of his share of the loss can Carrot deduct on his Year 1 return? Deduction
- Question 5 The XYZ Partnership is being formed by three partners. Their ownership in the partnership, and tax year ends are listed below. Determine which tax year the partnership can elect without IRS permission. June 30 Sept 30 Dec 31 deferral deferral deferral (# Total (# Total (# Total months) months) months) X 40% 6/30 0 Y 30% 9/30 3 9 3.6 6 2.4 0 Z 30% 12/31 6 1.8 3.0 Total 2.7 0 9 2.7 0 0 5.1 Which tax year can the partnership elect without IRS permission? 6/30 or 9/30 or 12/31?QUESTION 20 A partner's distributive share of partnership Losses is deductible on the partner's personal Federal Income Tax Return to the extent of the Partner's Basis in the partnership at the end of the Partnership tax year in whlch the Losses are incurred " after considering any Gains or distributions made to the partner for the year, O False O True QUESTION 21 Rosetta owns a fifty percent (50%) interest in the Velma Partnership. June is the other fifty percent (S0%) partner and is not related to Rosetta. On the sale of property items between Rosetta and Velma Partnership, Gains and Losses are recognized to the seller. O True O False QUESTION 22 For Federal Income Tax purposes, a Partnership can have a Corporation as a Partner. O True FalseChapter 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…Problem 6-20 modified B is invests $75,000 in BC Partnership (not a passive activity). In Year 1, B's share of the entity's loss is $50,000. In Year 2, his share of the partnership loss next year is $35,000. Bill's deductible loss from the activity in Year 1 and Year 2? At-risk amount Suspended (at-risk rules) Initial $75,000developed in part a(3). etd 189fc64d53a0a6a71 PROBLEM C.11 Dividing Partnership Profit and LossLOC-10 Rothchild Furnishings, Inc., has three partners-Axle, Brandt, and Conrad. At the beginning of the current year their capital balances were: Axle, $180,000; Brandt, $140,000; and Conrad, $80,000. The partnership agreement provides that partners shall receive salary allowances as follows: Axle, $10,000; Brandt, $50,000; and Conrad, $28,000. The partners shall also be allowed 12 percent interest annually on their capital balances. Residual profit or loss is to be divided: Axle, one-half; Brandt, one-third; and Conrad, one-sixth. Instructions Prepare separate schedules showing how income will be divided among the three partners in each of the following cases. The figure given in each case is the annual partnership net income or loss to be allocated among the partners. Round calculations to the nearest dollar. a. Income of $526,000. b. Income of $95,000. c. Loss of $32,000. PROBLEM C.12 Who…
- E 16-2 Partnership income allocation—Bonus Arn, Bev, and Car are partners who share profits and losses 30:30:40, respectively, after Bev, who manages the partnership, receives a bonus of 10 percent of income, net of the bonus. Partnership income for the year is $198,000. Required Prepare a schedule to allocate partnership income to Arn, Bev, and Car.Required information Problem 12-3A (Algo) Allocating partnership income LO P2 Skip to question [The following information applies to the questions displayed below.] Ries, Bax, and Thomas invested $58,000, $74,000, and $82,000, respectively, in a partnership. During its first calendar year, the firm earned $361,500. Required: Prepare the entry to close the firm’s Income Summary account as of its December 31 year-end and to allocate the $361,500 net income under each of the following separate assumptions.Required information Problem 12-3A (Algo) Allocating partnership income LO P2 [The following information applies to the questions displayed below] Ries, Bax, and Thomas invested $56,000, $72,000, and $80,000, respectively, in a partnership. During its first calendar year, the firm earned $430,200. Required: Prepare the entry to close the firm's Income Summary account as of its December 31 year-end and to allocate the $430,200 net income under each of the following separate assumptions. Problem 12-3A (Algo) Part 3 3. The partners agreed to share income and loss by providing annual salary allowances of $40,000 to Ries, $35,000 to Bax, and $47,000 to Thomas, granting 10% interest on the partners' beginning capital investments; and sharing the remainder equally. Complete this question by entering your answers in the tabs below. Appropriation of profits General Journal Allocate $430,200 net indome by providing annual salary allowances of $40,000 to Ries, $35,000 to Bax, and $47,000 to…