Question

William and Irene each contributed​ $20,000 cash to the WI Partnership on January 1 of last year. William and Irene share profits and losses equally. Last​ year, the partnership reported taxminus−exempt interest income of​ $4,000. This​ year, each partner receives​ $1,000 of the taxminus−exempt interest income in a cash distribution. There are no partnership liabilities and no other​ income, loss,​ contributions, or distributions during both years.​ William's basis in the partnership interest following these transactions is

Answer 1

Answer:

$21,000

Explanation:

Capital Account:

Particular     Williams   Irene      Particular      Williams         Irene

                        $            $                                    $                 $

Balance c/d 21,000   21,000     Cash              20,000      20,000              

                                             Cash distributn.   1,000          1,000

               21,000      21,000                            21,000         21,000

William's basis in the partnership business, is equal basis, because, the profit sharing ratio is on equal basis. The answer is $21,000.