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Heidi and Teresa Are Equal Partners in the HT Partnership

question 92

Essay

Heidi and Teresa are equal partners in the HT Partnership. The partners formed the partnership seven years ago by contributing cash. Prior to any distributions, the partners each have a $50,000 basis in their partnership interests. On December 31, the partnership makes a pro rata operating distribution to Heidi of $60,000 cash. What is the amount and character of Heidi's recognized gain or loss? What is Heidi's remaining basis in HT?


Definitions:

Tax Exempt Equivalent Yield

A calculation that determines the return needed on a taxable bond to make it equivalent to the yield on a tax-exempt bond, factoring in the investor's tax rate.

Marginal Tax Rate

The amount of tax paid on an additional dollar of income.

Bond Yield

The return an investor realizes on a bond, calculated by dividing the annual interest payments by the current market price of the bond.

Equally Weighted Index

An equally weighted index is a stock market index in which each constituent stock contributes equally to the index's value, regardless of the company's market capitalization.

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