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 allocated 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 basis in the partnership interest at the end of year 4 can be calculated as follows:

Initial investment: $20,000
Share of liabilities from mortgage debt: $45,000

Loss in income during year 1: ($5,000)
Allocated income in years 2-4: $9,000
Allocated reduction in debt at end of year 4: ($1,100)

Therefore, Tom's adjusted basis at the end of year 4 is:
$20,000 + $45,000 - $5,000 + $9,000 - $1,100 = $67,900

So, the answer is (A) $67,900.

Tom Invested $20,000 in a Limited Partnership