Question

At the beginning of the year, Victoria's "tax basis" capital account balance in the VIP Partnership was $90,000. During the tax year, Victoria contributed property with a basis of $30,000 and a fair market value of $70,000. Her share of the partnership's loss was $12,000. At the end of the year, the partnership distributed $15,000 of cash to Victoria. Also, the partnership allocated $20,000 of recourse debt and $35,000 of nonrecourse debt to Victoria. What is Victoria's ending capital account balance determined using the "tax basis" method?

Answer 1

Victoria's ending capital a/c = $93,000

Explanation:

Given:

Opening account balance = $90,000

Victoria contribution = $30,000

Share in loss = $12,000

Distribution at end = $15,000

Computation of Victoria's ending capital a/c .

Victoria's ending capital a/c = Opening account balance + Victoria contribution - Share in loss - Distribution at end

= $90,000 + $30,000 - $12,000 - $15,000

= $93000

NOTE : Liabilities does not added in the Victoria's capital account.