Hilary had an outside basis in LTL, General Partnership of $10,000 at the beginning of the year. LTL reported the following items on Hilary's K-1 for the year: ordinarybusiness income of $5,000, a $10,000 reduction in Hilary's share of partnership debt, a cash distribution of $20,000, and tax-exempt income of $3,000. What is Hilary's adjusted basis at the end of the year?
A) $18,000.
B) $0.
C) $15,000.
D) ($9,000).
E) ($12,000).

Question

Quizplus · Accepted Answer

Hilary's adjusted basis is calculated as follows: Start with the beginning basis of $10,000, add the ordinary business income of $5,000, and the tax-exempt income of $3,000. Then subtract the $10,000 reduction in debt and the $20,000 cash distribution. The calculation is $10,000 + $5,000 + $3,000 - $10,000 - $20,000 = $0.

Hilary Had an Outside Basis in LTL, General Partnership of $10,000