Partner Tami (a 20% partner) had the following items reported to her on a partnership Schedule K-1: Tami had a basis in her partnership interest of $14,000 at the beginning of the year. Additionally, the partnership has recourse liabilities of $100,000 outstanding at the end of the year. What is Tami's basis in her partnership interest at the end of the year?

Question

Partner Tami (a 20% partner) had the following items reported to her on a partnership Schedule K-1:  Tami had a basis in her partnership interest of $14,000 at the beginning of the year. Additionally, the partnership has recourse liabilities of $100,000 outstanding at the end of the year. What is Tami's basis in her partnership interest at the end of the year?

Quizplus · Accepted Answer

Tami's share of ordinary income = 20% x $50,000 = $10,000
Tami's share of self-employment tax = 20% x ($50,000 - $10,000) x 0.153 = $1,842

Tami's share of the partnership's liabilities = 20% x $100,000 = $20,000

Tami's ending basis = Beginning basis + Share of income - Share of expenses + Share of liabilities

Tami's ending basis = $14,000 + $10,000 - $1,842 + $20,000 = $42,158

Therefore, Tami's basis in her partnership interest at the end of the year is $31,200 (D) after subtracting her share of liabilities from the total.

Partner Tami (A 20% Partner) Had the Following Items Reported