Problem - An examination of the RB Partnership's tax books provides the following information for the current year:
Operating (ordinary) income before guaranteed payments $225,000
Qualified dividend income $4,000
Guaranteed payment to Barry $25,000
Cash distribution to each partner $30,000
Interest on Georgia state bonds (exempt interest income) $2,000
Chartitable contributions made by partnership $4,000
Interest paid on funds used to purchase Georgia state bonds 500.
Increase in partnership liabilities 1/1-12/31 $30,000
Barry is a 30% partner in partnership capital, profits and losses. Assume the adjusted basis of his partnership liabilities for basis purposes.
a. What is Barry's adjusted basis for the partnership interest at the end of the year?
b. How much income must Barry report on his tax return for the current year? What is the character of income?