Jerry, a partner with 30% capital and profit interest, received his Schedule K-1 from Plush Pillows, LP. At the beginning of the year, Jerry's tax basis in his partnership interest was $50,000. His current year Schedule K-1 reported an ordinary loss of $15,000, long-term capital gain of $3,000, qualifying dividends of $2,000, $500 of non-deductible expenses, a $10,000 cash contribution, and a reduction of $4,000 in his share of partnership debt. What is Jerry's adjusted basis in his partnership interest at the end of the year?

Question

Quizplus · Accepted Answer

To calculate Jerry's adjusted basis in his partnership interest at the end of the year, we need to take into account the following:

Beginning tax basis in partnership interest: $50,000
+ Share of ordinary loss: -$15,000
+ Share of long-term capital gain: +$3,000
+ Share of qualifying dividends: +$2,000
+ Non-deductible expenses: -$500
+ Cash contribution: +$10,000
- Reduction in share of partnership debt: -$4,000

Adjusted basis in partnership interest at the end of the year:
= $50,000 - $15,000 + $3,000 + $2,000 - $500 + $10,000 - $4,000
= $45,500

Therefore, the correct answer is C) $45,500.

Jerry, a Partner with 30% Capital and Profit Interest, Received