Question

Wilson has a 40 percent interest in the assets and income of the CC&W Partnership, and the basis in his partnership interest is $45,000 at the beginning of 2018. During 2018, the partnership's net loss is $60,000 and Wilson's share of the loss is $24,000. Also, Wilson receives a cash distribution from the partnership of $12,000 on June 30, 2018.
a. Indicate the amount of income or loss from the partnership that should be reported by Wilson on his 2018 individual income tax return.
b. Calculate Wilson's basis in his partnership interest at the end of 2018.

Answer 1

Answer:

a. $24,000

b. $9,000

Explanation:

a. The amount of income or loss from the partnership is limited to the share of the loss rather than its partnership interest

In the given case, the partnership interest is $45,000 and the share of his loss is $24,000

So, $24,000 is reported in his individual income tax return

b. The computation of the Wilson's basis in his partnership interest is shown below:

= Basis in his partnership interest - share of the loss -  cash distribution received from the partnership

= $45,000 - $24,000 - $12,000

= $9,000