Final answer:
Hilary's adjusted basis in LTL General Partnership at the end of the year, after accounting for the reported items on her K-1, would be negative $3,000.
Step-by-step explanation:
To calculate Hilary's adjusted basis at the end of the year for her interest in LTL General Partnership, we start with her outside basis at the beginning of the year and consider the impact of each item reported on her K-1. We begin with an outside basis of $19,000 at the start of the year. Each item on the K-1 affects the basis as follows:
- Ordinary business income of $14,000 increases her basis.
- A $19,000 reduction in Hilary's share of partnership debt decreases her basis.
- A cash distribution of $29,000 decreases her basis.
- Tax-exempt income of $12,000 increases her basis.
The adjusted basis is calculated as follows:
Basis at the beginning: $19,000
+ Ordinary business income: +$14,000
- Reduction in debt: -$19,000
- Cash distribution: -$29,000
+ Tax-exempt income: +$12,000
Adjusted Basis at end of year: ($3,000)
This result indicates Hilary has a negative adjusted basis at the end of the year after considering the transactions. It's important to note that tax implications might arise from having a negative capital account, and the specifics would depend on various tax regulations.