Problem 1: Patty, a single taxpayer, owns a 25% interest in a partnership that operates a retail business. Her share of partnership income is $200,000. Her allocable share of W-2 wages paid by the partnership to its employees and unadjusted basis of qualified property are $75,000 and $700,000, respectively. Patty's total taxable income for the year was $275,000. What is the QBI deduction that Patty can take on her tax return?
Problem 2: Ann and Bob formed a general partnership, Ann contributed land with a basis of $3,000 and fair market value of $10,000. Ann had held the land as investment property and had purchased it five years earlier. Bob contributed $5,000 and equipment with a basis of $7,000 and fair market value of $5,000. Bob had used the equipment for two years in his sole proprietorship business and had claimed $2,000 of depreciation.
- What are the tax consequences to each of Ann and Bob?
- What are the tax consequences to the partnership?
- Construct a balance sheet to reflect the situation of the partners and partnership at the time of formation.