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. In addition, 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, which is calculated as follows:Beginning capital account balance: $85,000Add: Contribution of property: $10,000Add: Share of ordinary income: $40,000Less: Distribution: $15,000Less: Allocation of recourse debt: $12,000Less: Allocation of nonrecourse debt: $10,000Ending capital account balance: $116,000

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