Hilary had an outside basis in LTL General Partnership of $9,200 at the beginning of the year. LTL reported the following items on Hilary's K-1 for the year: ordinary business income of $4,200, a $9,200 reduction in Hilary's share of partnership debt, a cash distribution of $19,200, and tax-exempt income of $2,200. What is Hilary's adjusted basis at the end of the year?
A) ($12,800)
B) ($10,600)
C) $0
D) $13,400
E) $15,600

Question

Quizplus · Accepted Answer

Hilary's adjusted basis calculation: Starting basis of $9,200 + $4,200 ordinary business income + $2,200 tax-exempt income - $9,200 reduction in share of partnership debt - $19,200 cash distribution = $0. The basis cannot go below zero, so the correct answer is $0.

Hilary Had an Outside Basis in LTL General Partnership of $9,200