Problem - Jane acquired a 40% interest in the Waterstone General Partnership by contributing investment land with an adjusted basis of $24,000 and a fair market value of $105,000; Jane had originally acquired the land on 2/2/1991. The land was subject to a $35,000 mortgage which was assumed by the Waterstone General Partnership as part of the deal.
Mike acquired a 60% partnership interest in the partnership in exchange for a capital contribution of $105,000 in cash. Both capital contributions occurred on 1 January 2010. The partnership used the land contributed by Jane to operate a parking lot. During 2010, the partnership had net rental income from renting out the land of $160,000. In addition, on 25 December 2010, the land was sold for a total sales price of $125,000 ($90,000 of cash PLUS the buyer assumed the $35,000 mortgage).
The partnership distributed $20,000 of cash during 2010 ($8,000 to Jane & $12,000 to Mike).
In addition, the partnership borrowed $40,000 during 2010, and this recourse loan was still outstanding as of 12/31/2010.
REQUIRED:
A. How much and what type of income must Jane report from 2010 partnership activity?
B. What is Jane's basis in the partnership @12/31/2010?