At the beginning of the year, Heather's "tax basis" capital account balance in the HEP Partnership was $85,000. During the tax year, Heather contributed property with a basis of $6,000 and a fair market value of $10,000. Her share of the partnership's ordinary income and separately stated income and deduction items was $40,000. At the end of the year, the partnership distributed $15,000 of cash to Heather. Also, the partnership allocated $12,000 of recourse debt and $10,000 of nonrecourse debt to Heather. What is Heather's ending capital account balance determined using the "tax basis" method?
A)$116,000
B)$120,000
C)$126,000
D)$128,000
E)$138,000

Question

Quizplus · Accepted Answer

Heather's ending capital account balance is $116,000. This is calculated by adding her beginning capital account balance of $85,000 to her share of the partnership's ordinary income and separately stated income and deduction items of $40,000, and then subtracting the cash distribution of $15,000.

At the Beginning of the Year, Heather's "Tax Basis" Capital