Question

Jane's basis for her partnership interest at the beginning of the year was $60,000. For the year, her proportionate share of partnership items was as follows: partnership income of $10,000; partnership charitable contributions of $3,000; and a reduction of partnership liabilities of $5,000. Jane's adjusted basis (outside basis) for her partnership interest at year-end is:_____________

Answer 1

$62,000

Step-by-step explanation:

Jane's adjusted basis for partnership interest at year end = Jane's basis for partnership interest at the beginning + proportionate share in income earned during the period - proportionate share in liabilities incurred during the period - proportionate share in any contribution

= $60,000 + $10,000 - $5000 - $3000

= $62,000

Partnership basis and a partner's capital account refer to different concepts. A partner's base refers to the amount which is subject to tax, thus it can never be negative.

On the other hand, capital account balance of a partner can be in negative in case of insolvency.