Clark and Kent share profits and losses of 60% and 40% respectively. The tax bas
ID: 2530780 • Letter: C
Question
Clark and Kent share profits and losses of 60% and 40% respectively. The tax basis of each partner's interest in the partnership as of December 31, Year 1, was as follows:
Clark: $24,000
Kent: $18,000
During Year 2, the partnership had ordinary income of $50,000 and a long-term capital loss of $10,000 from the sale of securities. There were no distributions to the partners during Year 2. What is the amount of Kent's tax basis as of December 31, Year 2?
$33,000
$42,000
$38,000
$34,000
a$33,000
b$42,000
c$38,000
d$34,000
Explanation / Answer
Option D is correct.
Kent's Profit Sharing % 40% Share of Ordinary Income 50000*40% 20,000.00 Share of Long Term Capital Loss 10000*40% 4,000.00 Total Share of Firm Profit 16,000.00 Partner Interest Year 1 18,000.00 Kent's tax basis as of December 31, Year 2 34,000.00