Joey and Bob each have 50% interest in a Partnership.Both Joey and the partnership file returns on a calendar year basis.Partnership Q had a $12,000 loss in 2015.Joey's adjusted basis in his partnership interest on January 1,2015 was $5,000.In 2016,the partnership had a profit of $10,000.Assuming there were no other adjustments to Joey's basis in the partnership,what amount of partnership income (loss)should Joey show on his 2015 and 2016 individual income tax returns?

Question

Quizplus · Accepted Answer

For 2015, Joey's share of the partnership loss would be:
$12,000 x 50% = $6,000

Joey's adjusted basis at the end of 2015 would be:
$5,000 (beginning basis) - $6,000 (share of loss) = ($1,000)

Since Joey's basis is negative at the end of 2015, he cannot deduct any losses on his individual tax return for that year.

For 2016, Joey's share of the partnership profit would be:
$10,000 x 50% = $5,000

Joey's adjusted basis at the end of 2016 would be:
($1,000) (beginning basis) + $5,000 (share of profit) = $4,000

Therefore, Joey should report $5,000 of partnership income on his 2016 individual income tax return.

Joey and Bob Each Have 50% Interest in a Partnership