An examination of the RB Partnership's tax books provides the following information for the current year. $\begin{array}{lr}
\text { Operating (ordinary) income before guaranteed payments } & \$ 300,000 \
\text { Long-term capital gain } & 6,000 \
\text { Guaranteed payment to Rachel for services } & 30,000 \
\text { Cash distributions to Rachel } & (20,000)
\end{array}$ $\begin{array}{lr}
\text { Interest on Colorado state bonds (exempt interest income) } & 2,000 \
\text { Charitable contributions made by partnership } & (10,000) \
\text { Decrease in partnership liabilities from 1/1-12/31 } & (20,000)
\end{array}$ Rachel is a 30% general partner in partnership capital, profits, and losses. Assume that the adjusted basis of her partnership interest is $60,000 at the beginning of the year, and she shares in 30% of the partnership's liabilities for basis purposes.
a. What is Rachel's adjusted basis for the partnership interest at the end of the year?
How much income must Rachel report on her tax return for the current year? What deductions
b. might be available? What is the character of the income and what types of tax might apply to
it?

Question

An examination of the RB Partnership's tax books provides the following information for the current year. $\begin{array}{lr}
\text { Operating (ordinary) income before guaranteed payments } & \$ 300,000 \
\text { Long-term capital gain } & 6,000 \
\text { Guaranteed payment to Rachel for services } & 30,000 \
\text { Cash distributions to Rachel } & (20,000)
\end{array}$ $\begin{array}{lr}
\text { Interest on Colorado state bonds (exempt interest income) } & 2,000 \
\text { Charitable contributions made by partnership } & (10,000) \
\text { Decrease in partnership liabilities from 1/1-12/31 } & (20,000)
\end{array}$ Rachel is a 30% general partner in partnership capital, profits, and losses. Assume that the adjusted basis of her partnership interest is $60,000 at the beginning of the year, and she shares in 30% of the partnership's liabilities for basis purposes. 
a. What is Rachel's adjusted basis for the partnership interest at the end of the year?
How much income must Rachel report on her tax return for the current year? What deductions
b. might be available? What is the character of the income and what types of tax might apply to
it?

Quizplus · Accepted Answer

The Answer of An examination of the RB Partnership's tax books provides the following information for the current year. $\begin{array}{lr}
\text { Operating (ordinary) income before guaranteed payments } & \$ 300,000 \
\text { Long-term capital gain } & 6,000 \
\text { Guaranteed payment to Rachel for services } & 30,000 \
\text { Cash distributions to Rachel } & (20,000)
\end{array}$ $\begin{array}{lr}
\text { Interest on Colorado state bonds (exempt interest income) } & 2,000 \
\text { Charitable contributions made by partnership } & (10,000) \
\text { Decrease in partnership liabilities from 1/1-12/31 } & (20,000)
\end{array}$ Rachel is a 30% general partner in partnership capital, profits, and losses. Assume that the adjusted basis of her partnership interest is $60,000 at the beginning of the year, and she shares in 30% of the partnership's liabilities for basis purposes. 
a. What is Rachel's adjusted basis for the partnership interest at the end of the year?
How much income must Rachel report on her tax return for the current year? What deductions
b. might be available? What is the character of the income and what types of tax might apply to
it?

An Examination of the RB Partnership's Tax Books Provides the Following