Tom invested $20,000 in a limited partnership. His share of liabilities from mortgage debt was initially $45,000. The property suffered a loss in income during the first year, of which Tom's share was $5,000. However, in years two through four income allocated from the account equaled a total of $9,000 $3,000 per year). The reduction in debt at the end of year 4 from amortization of the loan is equal to $1,100. What is Tom's basis in the partnership interest at the end of year 4?

Question

Quizplus · Accepted Answer

Tom's initial basis is $20,000 (investment) + $45,000 (liabilities) = $65,000. Subtract the $5,000 loss, add $9,000 income, and subtract $1,100 debt reduction: $65,000 - $5,000 + $9,000 - $1,100 = $67,900.

Tom Invested $20,000 in a Limited Partnership