Joey and Bob Each Have 50% Interest in a Partnership

question 18

Multiple Choice

Joey and Bob each have 50% interest in a Partnership.Both Joey and the partnership file returns on a calendar year basis.Partnership Q had a $12,000 loss in 2015.Joey's adjusted basis in his partnership interest on January 1,2015 was $5,000.In 2016,the partnership had a profit of $10,000.Assuming there were no other adjustments to Joey's basis in the partnership,what amount of partnership income (loss) should Joey show on his 2015 and 2016 individual income tax returns?

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Definitions:

Impairment Test

An examination to determine if an asset's carrying amount exceeds its recoverable amount, and if so, to measure the amount of impairment loss.

Book Value

A financial measurement that calculates the value of a firm's equity as it appears on the balance sheet by subtracting liabilities from assets.

Fair Value

The estimated price at which an asset or liability could be traded in an orderly transaction between market participants at the measurement date.

Consolidation Elimination

The process of removing intra-group transactions and balances from the consolidated financial statements of a group of companies.