Jackie contributed $60,000 in cash to a partnership for a 50% interest. This year, the partnership earned $200,000 ordinary business income, made a $20,000 contribution to the United Way, and distributed $25,000 cash to Jackie. Her tax basis in the partnership at year end is:

Question

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Jackie's initial tax basis is her initial contribution of $60,000. Her share of the partnership's ordinary business income ($200,000) increases her basis by $100,000 (50% of $200,000), and her share of the charitable contribution ($20,000) decreases her basis by $10,000 (50% of $20,000). The cash distribution of $25,000 decreases her basis by $25,000. Therefore, her ending tax basis is $60,000 + $100,000 - $10,000 - $25,000 = $125,000.

Jackie Contributed $60,000 in Cash to a Partnership for a 50