Partner X is a 50% partner in the XY Partnership that has the following assets a
ID: 2538698 • Letter: P
Question
Partner X is a 50% partner in the XY Partnership that has the following assets and liabilities at year-end. Assume the book basis and tax basis are the same amount.
Assets Basis Value
Machine $ 9,000 $ 21,000
Land $ 80,000 $ 100,000
Note 1 $ 15,000 $ 15,000
Note 2 $ 90,000 $ 90,000
Depreciation on the machine was allocated one-third to X and two-thirds to Y. Both notes are nonrecourse. If partner X has a negative capital account of ($5,000) and Y has a negative capital account of ($10,000), how much of the partnership's taxable income of $18,000 will be allocated to partner Y?
Explanation / Answer
Profit sharing ratio = 1:1
Partnership's taxable income = $18,000
Allocation to Partner Y = $18,000 / 2 = $9,000