The Salt and Pepper Partnership was formed in January of the current year when Salt and Pepper each contributed $10,000 cash and together began to operate a business as equal partners. Both work full-time in the partnership. The partnership borrowed $40,000 on a nonrecourse basis during the year. There are no guarantees or loss limitation agreements. Operations in the year resulted in a $5,000 ordinary loss, $2,000 tax-exempt income, and an $800 charitable contribution. What is Salt's basis at the end of the current year?

Question

Alfonso Vega

Business

1 October, 11:12

The Salt and Pepper Partnership was formed in January of the current year when Salt and Pepper each contributed $10,000 cash and together began to operate a business as equal partners. Both work full-time in the partnership. The partnership borrowed $40,000 on a nonrecourse basis during the year. There are no guarantees or loss limitation agreements. Operations in the year resulted in a $5,000 ordinary loss, $2,000 tax-exempt income, and an $800 charitable contribution. What is Salt's basis at the end of the current year?

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Nikolai Robinson · Answer 1

Salt's basis = - $3900 from a 50% sharing basis

Explanation:

profit sharing ratio as per contributions is 50%:50%

ordinary loss - $5000

tax exempt income - $2000

Charitable contribution - $800

Taxable loss = $7800

profit (loss) share

Salt = - 3900

Pepper = -3900