Complete each of the following case scenarios. Case 1DEF Services is owned by individuals, Mac,...

Question

Complete each of the following case scenarios.

Case 1

DEF Services is owned by individuals, Mac, Norm, Otto, and Paul. They share profits and losses 40:30:15:15. Mac and Norm have tax years ending 6/30. Otto and Paul use the calendar year.

The partnership's activities for the tax year ending 6/30/-Y2 are:

Sales	$350,000
Cost of goods sold	$150,000
Jobs credit	$8,000
§1231 gain, 10-15-Y1	$60,000
Muni Bd interest	$24,000
Charitable contribution	$6,000

Tasks:

Allocate the partnership's income and other receipts/payments to its four partners for their tax years ending in Year 2.

Mac received guaranteed payments of $12,000 per month through the year ending 6/30/ (Y2). Norm received guaranteed payments of $1,500 per month for the year ending 6/30/-Y2. Otto and Paul each receive capital account withdrawals of $7,500 per month. Allocate the partnership's income and other receipts/payments to its four partners for their tax years ending in Y2.

Case 2

Three individuals form the ABC partnership and each contribute the following to form the partnership:

Cash: $35,000.00

Future services to be rendered to the partnership worth: $350,000

Real property with a basis of $300,000.00 and a fair market value of $350,000.00.

Tasks:

What is each partner's original basis in the partnership interest?

What is the partnership's basis in each partner's contribution?

Case 3

Greg owns a 50 percent share of the Rich and Greg RG law firm partnership. Both partners and the entity are on the calendar year for tax purposes. Greg's basis in the partnership interest at the beginning of the year is $300,000. The partnership's relevant data for year 1 includes the following:

Partnership ordinary income $500,000

Partnership municipal bond interest $100,000

Greg capital; account withdrawals $250,000

December 31st (end of year) cash distribution to the partners $150,000

December 31st (end of year) property distribution to Greg: fair-market value $30,000

Basis $25,000

Partnership's liabilities January 1st (beginning of year) $20,000

Partnership's liabilities December 31st (end of year) $100,000

Tasks:

What is Greg's basis in the partnership before the December 31st distributions?

What is Greg's basis in the property distributed?

Submission Details:

Submit your answers in a Microsoft Excel spreadsheet.

case-1-pk0fbxc5.docx

Bhavani · Accepted Answer

Case 1
	1)	Allocate the partnership's income
		Data	 Mac	Norm	Otto	Paul
	  Partner's  share		40%	30%	15%	15%
	Ordinary  income	$ 200,000	$ 80,000	$ 60,000	$ 30,000	$ 30,000
	Add:
	§1231 gain	$ 60,000	$ 24,000	$ 18,000	$ 9,000	$ 9,000
	Muni Bd interest	$ 24,000	$ 9,600	$ 7,200	$ 3,600	$ 3,600
	Jobs credit	$ 8,000	$ 3,200	$ 2,400	$ 1,200	$ 1,200
	Less:
	Charitable contribution	$ 6,000	$ 2,400	$ 1,800	$ 900	$ 900
	Allocated  the  income  to  
	partners		$ 114,400	$ 85,800	$ 42,900	$ 42,900
	Calculation:
	Ordinary  income:
	Sales  - Cost of  goods  sold
	$350,000 - $150,000 = $200,000
	2) 
		Data	 Mac	Norm	Otto	Paul
	  Partner's  share		40%	30%	15%	15%
	Ordinary  income	$ 200,000	$ 80,000	$ 60,000	$ 30,000	$ 30,000
	Add:
	§1231 gain	$ 60,000	$ 24,000	$ 18,000	$ 9,000	$ 9,000
	Muni Bd interest	$ 24,000	$ 9,600	$ 7,200	$ 3,600	$ 3,

Complete each of the following case scenarios. Case 1DEF Services is owned by individuals, Mac, Norm, Otto, and Paul. They share profits and losses 40:30:15:15. Mac and Norm have tax years ending...

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