On January 1, 20X9, Mr The $3,000 of Interest Was Paid on a $60,000 Loan

question 31

Essay

On January 1, 20X9, Mr.Blue and Mr.Grey each contributed $100,000 to form the B&G General Partnership.Their partnership agreement states that they will each receive a 50 percent profits and loss interest.The partnership agreement also provides that Mr.Blue will receive an annual $36,000 guaranteed payment.B&G began business on January 1, 20X9.For its first taxable year, its accounting records contained the following information:
$\begin{array}{c}\begin{array}{lll} \text {Gross receipts fromt sales}\\ \text {Cost of sales}\\ \text {Gross profit}\\ \text {Guarariteed paynents to Mr. Blue}\\ \text {Interest paid on business debt}\\ \text {Dividend income}\\ \text {Tax-exerrpt interest}\\ \text {Operating experises}\\ \text {Depreciation expense}\\ \text {Section 1231 gairs}\\\end{array}\begin{array}{lr}\$ & 150,000 \\\$ & (220,000 \\\$ & (70,000 \\\$ & (36,000 \\\$ & (3,000 \\\$ & 500 \\\$ & 1,500 \\\$ & (138,000 \\\$ & (9,000 \\\$ & 8,000 \end{array}\end{array}$
The $3,000 of interest was paid on a $60,000 loan made to B&G by Key Bank on June 30, 20X9.B&G repaid $10,000 of the loan on December 15, 20X9.Neither of the partners received a cash distribution from B&G in 20X9.
Complete the following table related to Mr.Blue's interest in B&G partnership:
$\begin{array}{llcc} \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad \text { Item } & \text { Amount} \\ \text { Mr. Blue's ordinary business income (loss) allocation for \(20 X 9\) } &\\ \text { Mr. Blue's self-ernployment earnings (loss) for 20X9 } &\\ \text { Mr. Blue's tax basis in his B\&G interest on Deceunber \(31,20 X 9\) } &\\\end{array}$

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