Mutt and Jeff are general partners in M&J Partnership and share profits and losses equally. Partnership operations for the current tax year were: $$\begin{array} { l l }
\text { Ordinary business income } & \$ 100,000 \
\text { Long-term capital gain } & 10,000 \
\text { Total distributions to partners } & 60,000
\end{array}$$ Mutt's tax basis in his partnership interest at the beginning of the current year was $12,000. What is his basis at the beginning of next year?

Question

Mutt and Jeff are general partners in M&J Partnership and share profits and losses equally. Partnership operations for the current tax year were: $$\begin{array} { l l } 
\text { Ordinary business income } & \$ 100,000 \
\text { Long-term capital gain } & 10,000 \
\text { Total distributions to partners } & 60,000
\end{array}$$ Mutt's tax basis in his partnership interest at the beginning of the current year was $12,000. What is his basis at the beginning of next year?

Quizplus · Accepted Answer

Mutt's basis at the beginning of next year is $37,000. This is calculated by adding his beginning basis of $12,000 to his share of the partnership's ordinary business income ($50,000) and long-term capital gain ($5,000), and then subtracting his share of the partnership's distributions ($30,000).

Mutt and Jeff Are General Partners in M&J Partnership and Share