Ashley purchased her partnership interest from Lindsey on the first day of the current year for $40,000 cash.She received a $10,000 cash distribution from the partnership during the year, and her share of partnership income is $15,000.If her share of partnership liabilities on the last day of the partnership year is $20,000, her outside basis for her partnership interest at the end of the year is $65,000.

Question

Quizplus · Accepted Answer

To calculate Ashley's basis in her partnership interest we start with her initial purchase price which is $40,000. We then add her share of partnership income which is $15,000 and subtract any cash distributions she received from the partnership, which is $10,000. This gives us a total of $45,000.

We then add her share of partnership liabilities which is $20,000. This brings her outside basis to $65,000 at the end of the year. Therefore, the statement is true.

Ashley Purchased Her Partnership Interest from Lindsey on the First