Alfred, a One-Third Profits and Capital Partner in Pizzeria Partnership

question 66

Essay

Alfred, a one-third profits and capital partner in Pizzeria Partnership, needs help in adjusting his tax basis to reflect the information contained in his most recent Schedule K-1 from the partnership.Unfortunately, the Schedule K-1 he recently received was for Year 3 of the partnership, but Alfred only knows that his tax basis at the beginning of Year 2 of the partnership was $23,000.Thankfully, Alfred still has his Schedule K-1 from the partnership for Years 1 and 2.
Using the following information from Alfred's Year 1, Year 2, and Year 3 Schedule K-1, calculate his tax basis the end of Year 2 and Year 3.
$\begin{array}{c}\begin{array}{lll} \text {Year 1:}\\ \text {Ordinary business income}\\ \text {Cash distribution}\\ \text {Alfred's share of partnership debt}\\ \text {Guaranteed payment}\\ \text {Nondeductible expense}\\ \text {Tax-exempt income}\\ \text {Year 2:}\\ \text {Ordinary business loss}\\ \text {Cash contribution}\\ \text {Alfred's share of partnership debt}\\ \text {Guaranteed payment}\\ \text {Nondeductible expense}\\ \text {Tax-exempt income}\\ \text {Year 3:}\\ \text {Ordinary business loss}\\ \text {Alfred's share of partnership debt}\\ \text {Nondeductible expenses}\\ \text {Guaranteed payment}\\\end{array}\begin{array}{lr}\\\$ & 10,000 \\\$ & 7,000 \\\$ & 85,000 \\\$ & (4,500 \\\$ & (1,000) \\\$ & 1,200 \\\\\$ & (5,000) \\\$ & 10,000 \\\$ & 73,000 \\\$ & (7,500 \\\$ & (3,000) \\\$ & 1,500 \\& \\\$ & (13,000) \\\$ & 58,000 \\\$ & (3,000) \\\$ & (7,500 \end{array}\end{array}$

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Definitions:

Craik And Lockhart

Refers to a theory of memory proposed by Fergus I. M. Craik and Robert S. Lockhart that suggests memory retention is determined by the depth of mental processing, with deeper levels of analysis leading to more enduring memory.

Rectangular

Having the shape or characteristics of a rectangle, which is a four-sided figure with opposing sides equal and right angles.

Long-Term Memory

The phase of the memory system capable of storing information for prolonged periods, often throughout a person's life.

Unlimited Capacity

A hypothetical concept suggesting that there's no upper limit to the amount of information the human brain can store.