Ryan is a 25% partner in the ROCC Partnership.At the beginning of the tax year,Ryan's basis in the partnership interest was $90,000,including his share of partnership liabilities.During the current year,ROCC reported net ordinary income of $100,000.In addition,ROCC distributed $10,000 to each of the partners ($40,000 total).At the end of the year,Ryan's share of partnership liabilities increased by $10,000.Ryan's basis in the partnership interest at the end of the year is:

Question

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Ryan's basis in the partnership interest at the beginning of the year was $90,000, which included his share of partnership liabilities. During the year, the partnership reported net ordinary income of $100,000, and Ryan's share of that income was $25,000 (25% of $100,000). In addition, Ryan received a distribution of $10,000, which reduces his basis by that amount.

However, at the end of the year, Ryan's share of partnership liabilities increased by $10,000, which increases his basis by that amount. Therefore, Ryan's basis in the partnership interest at the end of the year is $90,000 (starting basis) + $25,000 (share of income) + $10,000 (increase in liabilities) - $10,000 (distribution) = $115,000.

Ryan Is a 25% Partner in the ROCC Partnership