Problem: Suzy contributed assets valued at $360,000 (basis of $200,000) in exchange for her 40% interest in Suz-Anna GP (a general partner-ship). Anna contributed land and a building valued at $640,000 (basis of $380,000) in exchange for the remaining 60% interest. Anna's property was encumbered by a qualified nonrecourse debt of $100,000, which was assumed by the partnership. The partnership reports the following income and expenses for the current tax year:
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Sales
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$560,000
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Utilities, salaries, and other operating expenses
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360,000
|
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Short-term capital gain
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10,000
|
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Tax-exempt interest income
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4,000
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|
Charitable contributions
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8,000
|
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Distribution to Suzy
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10,000
|
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Distribution to Anna
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20,000
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During the current tax year, Suz-Anna refinanced the land and building. At the end of the year, Suz-Anna had recourse debt of $100,000 for partnership accounts payable and qualified nonrecourse debt of $200,000.
a. What is Suzy's basis after formation of the partnership? Anna's basis?
b. What income and separately stated item does the partnership report on Suzy's Schedule K-1? What items does Suzy report on her tax return?