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Hilary had an outside basis in LTL, General Partnership of $10,000 at the beginning of the year. LTL reported the following i
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Answer #1

ANSWER : C ( $ 12000 GAIN, $ 0 ADJUSTED BASIS )

EXPLANATION :

Hilary's basis is to be increased by her share of ordinary business income and

tax exempt income and then reduced by her actual cash distribution and deemed

cash distribution from the reduction in her share of partnership debt. because her

actual and deemed cash distribution exceed her basis after increasing it by the positive

adjustments for the year , Hilary must report $ 12000 of capital gain leaving her with

a zero basis in her partnership interest.

so, adjusted basis is calculation below.

adjusted basis = ( $ 10,000 + $ 5,000 + $ 3,000 - $ 10,000 - $ 20,000 )

= ( $ 12,000 ) + $ 12,000 ( gain )

= $ 0

so , adjusted basis is $ 0

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