Micah's beginning capital account on his Schedule K-1 is $60,000. During the year, he is allocated $20,000 of partnership income, $8,000 of nondeductible expenses, and a $12,000 share of tax-exempt income. His Schedule K-
1s show allocations of nonrecourse debt of $20,000 (last year) and $30,000 (this year). Micah's ending capital account is $94,000.

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Micah's beginning capital account is $60,000. Adding the allocated partnership income ($20,000), tax-exempt income ($12,000), and subtracting the nondeductible expenses ($8,000) results in an adjusted capital account of $84,000. The allocations of nonrecourse debt do not directly affect the capital account balance; thus, the ending capital account should be $84,000, not $94,000.

Micah's Beginning Capital Account on His Schedule K-1 Is $60,000