Taxation

Erica and Greg are equal partners in the accrual basis EG Partnership. At the beginning of the current tax year, Erica’s capital account has a balance of $120,000, and the partnership has recourse debts of $80,000 payable to unrelated parties. All partnership recourse debt is shared equally between the partners. The following information about EG’s operations for the current year is obtained from the partnership’s records. Taxable income $140,000 Interest income from City of Huntsville bond 2,000 § 1231 gain 4,000 Short-term capital loss 3,000 Political contribution 1,000 Charitable contribution to Red Cross 2,000 Cash distribution to Erica 10,000 Year-end partnership debt payable to unrelated parties is $100,000. If all transactions are reflected in her beginning capital and basis in the same manner:

a. What is Erica’s basis in the partnership interest at the beginning of the year?

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b. What is Erica’s basis in the partnership interest at the end of the current year?

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