federal taxation homework

In 2014 tom and missy from TM Partnership, Ltd. (an LLLP), to own and operate certain real estate. Tom contributed land, and missy contributed cash to be used for setting up the entity and creating a plan for developing the property. Once a development plan was in place, the partnership sold interests in the partnership to investors to raise funds for constructing a shopping center. The partnership incurred expenses of $30,000 for forming the entity and $60,000 for starting the business (e.g. setting up the accounting system, locate tenants and negotiating leases). It also paid $5,000 in transfer taxes for changing the ownership of the property to the partnership name. There brokerage firm that sold the interests to the limited partners charged a 6% commission which totaled $600,000. The calendar partnership started business in November 2014. Describe how all of these initial expenses are treated by the partnership.

On July 1 of the current year, the R&R Partnership (an LLLP) was formed to operate a bed-and-breakfast. The partnership paid $3,000 in legal fees for drafting the partnership agreement and $5,000 for accounting fees related to organizing the entity. It also paid $10,000 in syndication cost to locate and secure investments from limited partners. In addition, before opening the inn for business, the entity paid $15,500 for advertising and $36,000 in costs related to and open house just before the grand opening of the property. The partnership opened the inn for business on Oct 1. a. How are these expenses classified? b. how much may the partnership deduct in its initial year operations? c. How are costs treated that are not deducted currently?

Amy and Mitchell are equal partners in the accrual basis AM partnership. At the beginning of the current year, Amy’s capital account has a balance of $300,000 and the partnership has recourse debts of $200,000 payable to unrelated parties. Assume that all partnership recourse debt is shared equally between the partners. The following information about AM’s operations for the current year is obtained from the partnership’s records. ordinary income $400,000 interest income $4,000 Long-term capital loss $6,000 short-term capital gain $12,000 charitable contribution $4,000 cash distribution to Amy $20,000 assume that year-end partnership debt payable to unrelated parties is $140,000. if all transactions are reflected in her beginning capital and basis in the same manner, what is amy’s basis in the partnership interest: a. At the beginning of the year? b. at the end of the year?

The KL Partnership is owned equally by kayla and lisa. Kayla’s basis is $20,000 at the beginning of the tax year. Lisa’s basis is $16,000 at the beginning of the year. KL reported the following income and expenses for the current tax year: sales revenue $150,000 cost of sales $80,000 Distribution to lisa $15,000 depreciation expense $20,000 utilities $14,000 Rent expense $18,000 Long-term capital gain $6,000 payment to mercy hospital for kayla’s medical expenses $12,000 a. Determine the ordinary partnership income and separately stated items for the partnership b. calculate Kayla’s basis in her partnership interest at the end of the tax year. What items should kayla report on her federal income tax return c. calculate Lisa’s basis in her partnership interest at the end of the following year. What items should lisa report on her federal tax return.

Suzy contributed business-related assets valued at $360,000 (basis of $200,000) in exchange for her 40% interest in the Suz-Anna Partnership. Anna contributed land and a building valued at $640,000 (basis $380,000)in exchange for the 60% interest. Anna’s property was encumbered by a qualified nonrecourse debt of $100,000, which was assumed by the partnership. The partnership reports the following income and expenses for the current tax year. sales $560,000 utilities, salaries, and other operating expenses $360,000 short-term capital gain $10,000 tax-exempt interest income $4,000 charitable contributions $8,000 distributions to suzy $10,000 distribution to Anna $20,000 During the current tax year, su-anna refinanced the land and building. At the end of the year, suz-anna had recourse debt of $100,000 for partnership accounts payable and qualified nonrecourse debt of $200,000. a. what is Suzy’s basis after formation of the partnership? Ann’s basis? b. what income and separately stated items does the partnership report on suzy’s schedule K-1? What items does suzy report on tax return. c. Assume that all partners hip debts are shared proportionately. At the end of the tax year, what are suzy’s basis and the amount of risks in her partnership interest?