Question

8. Esterina had a basis in her partnership interest at the beginning of last year of $25,000. There was no change in partnership liabilities during the year. Her share of the partnership's ordinary loss last year was $30,000 and the partnership had no separately stated items. This year, Esterina has a distributive share of ordinary income of $17.500. The taxable income from the partnership reported on Esterina's personal income tax return this year (ignoring the at-risk and passive activity loss limitations) is

A) $5,000 ordinary loss.

B) $12,500 ordinary income.

C) $17,500 ordinary income.

D) $25,000 ordinary income.

Answer 1

	Correct option is: B) $12,500 Ordinary Income
	Workings:
	Partnership ordinary loss last year	=	$       30,000
Less:	Basis in partnership last year	=	$       25,000
	Loss carry forward	=	$         5,000
	Distributive ordinary Income	=	$       17,500
Less:	Loss carry forward	=	$         5,000
	Net ordinary Income	=	$       12,500