Question

Jerry, a partner with 30 percent capital and profits interest, received his Schedule K-1 from Plush Pillows, LP. At the beginning of the year, Jerry's tax basis in his partnership interest was $42,000. His current-year Schedule K-1 reported an ordinary loss of $7,000, long-term capital gain of $4,800, qualified dividends of $3,800, $2,300 of non-deductible expenses, a $28,000 cash contribution, and a reduction of $5,800 in his share of partnership debt. What is Jerry's adjusted basis in his partnership interest at the end of the year?

Answer 1

$63,500

Step-by-step explanation:

Calculation to determine Jerry's adjusted basis in his partnership interest at the end of the year

Using this formula

Partnership interest adjusted basis =Partnership interest+Cash contribution+Long-term capital gain+Qualified dividends -Reduction in partnership debt -Non-deductible expenses-Reported an ordinary loss

Let plug in the formula

Partnership interest adjusted basis=$42,000+ $28,000 + $4,800 + $3,800 - $5,800 - $2,300 - $7,000

Partnership interest adjusted basis = $63,500

Therefore Jerry's adjusted basis in his partnership interest at the end of the year will be $63,500