Partner Spence had the following items reported on a partnership Schedule K-1: Spence had a basis in his partnership interest of $23,000 at the beginning of the year.What is Spence's basis in his partnership interest at the end of the year?

Question

Partner Spence had the following items reported on a partnership Schedule K-1:  Spence had a basis in his partnership interest of $23,000 at the beginning of the year.What is Spence's basis in his partnership interest at the end of the year?

Quizplus · Accepted Answer

To find Spence's basis in his partnership interest at the end of the year, we need to consider the different items reported on the Schedule K-1 and their impact on his basis.

Starting with the ordinary business income of $45,000, this increases Spence's basis by that amount, bringing it to $68,000 ($23,000 + $45,000).

Next, we have the section 179 expense deduction of $30,000. This reduces Spence's basis by that amount, leaving it at $38,000 ($68,000 - $30,000).

Moving on to the charitable contribution deduction of $4,800, this also reduces Spence's basis by that amount, leaving it at $33,200 ($38,000 - $4,800).

Finally, we have the self-employment tax deduction of $600. This doesn't directly impact Spence's basis, but it does reduce his taxable income from the partnership.

Therefore, Spence's basis in his partnership interest at the end of the year is $33,200, which corresponds to answer choice B.

Partner Spence Had the Following Items Reported on a Partnership