Barb and Chuck each have a 50% ownership in Wren Partnership. Each partner has a partnership interest basis of $125,000. Wren's taxable income for the current year is $90,000, and it distributes $60,000 to each partner. Barb's basis in the partnership interest at the end of the year is:
A) $0.
B) $65,000.
C) $110,000.
D) $125,000.
E) None of the above.

Question

Quizplus · Accepted Answer

Each partner's beginning basis is $125,000. Barb's share of the partnership income is $45,000 ($90,000 x 50%), which increases her basis to $170,000 ($125,000 + $45,000). Barb's share of the partnership distribution is $60,000, which decreases her basis to $110,000 ($170,000 - $60,000). Therefore, Barb's basis in the partnership interest at the end of the year is $110,000.

Barb and Chuck Each Have a 50% Ownership in Wren