The BCD Partnership plans to distribute cash of $20,000 to partner Brad at the end of the tax year. The partnership reported a loss for the year, and Brad's share of the loss is $10,000. At the beginning of the tax year, Brad's basis in his partnership interest, including his share of partnership liabilities, was $15,000. The partnership expects to report substantial income in future years. If an amount is zero, "0". a. Generally, in what order are the allocated items applied for calculating Brad's ending basis in his partnership interest? • Losses may be deducted under 5 704(d). Distributions from the partnership decrease basis. Contributions and income items increase the basis. Allocation of deductions. b. How much gain or loss will Brad report for the tax year? As a result of the $20,000 distribution, Brad's basis is s and reports a s for the tax year. c. How will the deduction for the $10,000 loss be treated by Brad? d. Select either "Yes as something that could be done to minimize any negative tax ramifñications of the distribution or "No", this can not be done. The partnership can make the distribution at the beginning of the fllowing tax year. The partnership could incur additional (short-term) debt at the end of the year. • Brad can allocate his loss to another partner.
The BCD Partnership plans to distribute cash of $20,000 to partner Brad at the end of the tax year. The partnership reported a loss for the year, and Brad's share of the loss is $10,000. At the beginning of the tax year, Brad's basis in his partnership interest, including his share of partnership liabilities, was $15,000. The partnership expects to report substantial income in future years. If an amount is zero, "0". a. Generally, in what order are the allocated items applied for calculating Brad's ending basis in his partnership interest? • Losses may be deducted under 5 704(d). Distributions from the partnership decrease basis. Contributions and income items increase the basis. Allocation of deductions. b. How much gain or loss will Brad report for the tax year? As a result of the $20,000 distribution, Brad's basis is s and reports a s for the tax year. c. How will the deduction for the $10,000 loss be treated by Brad? d. Select either "Yes as something that could be done to minimize any negative tax ramifñications of the distribution or "No", this can not be done. The partnership can make the distribution at the beginning of the fllowing tax year. The partnership could incur additional (short-term) debt at the end of the year. • Brad can allocate his loss to another partner.
Chapter21: Partnerships
Section: Chapter Questions
Problem 2BCRQ
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Transcribed Image Text:The BCD Partnership plans to distribute cash of $20,000 to partner Brad at the end of the tax year. The partnership reported a loss for the
year, and Brad's share of the loss is $10,000. At the beginning of the tax year, Brad's basis in his partnership interest, including his share
of partnership liabilities, was $15,000. The partnership expects to report substantial income in future years.
If an amount is zero, "0".
a. Generally, in what order are the allocated items applied for calculating Brad's ending basis in his partnership interest?
Losses may be deducted under 5 704(d).
• Distributions from the partnership decrease basis.
• Contributions and income items increase the basis.
Allocation of deductions.
b. How much gain or loss will Brad report for the tax year?
As a result of the $20,000 distribution, Brad's basis is $
and reports a
for the tax
year.
c. How will the deduction for the $10,000 loss be treated by Brad?
d. Select either "Ves" as something that could be done to minimize any negative tax ramifications of the distribution or "No", this can not
be done.
The partnership can make the distribution at the beginning of the following
tax year.
The partnership could incur additional (short-term) debt at the end of the
year.
• Brad can allocate his loss to another partner.
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