Problem
During the current year, ARC Partnership reported the following items of receipts and expenditures: $500,000 sales, $50,000 utilities, $90,000 rent, $200,000 salaries to employees, $50,000 guaranteed payment to partner Mitchell, investment interest income of $4,000, a charitable contribution of $10,000, and a distribution of $40,000 to partner Rowan. Also, Ava received a $30,000 distribution. Ava is a 50% partner. What items will be reflected on Ava's Schedule K-1? Assuming Ava's outside basis at the beginning of the year is $100,000. What will be her ending outside basis at the end of this fiscal year? Is her distribution taxable? If so will it be taxable at her tax rate or at the partnerships?