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Locke Is a 50% Partner in the LS Partnership

question 40

Essay

Locke is a 50% partner in the LS Partnership. Locke has a basis in his partnership interest of $84,000 at the end of the current year, prior to any distribution. On December 31, Locke receives an operating distribution of $30,000 cash. LS has no debt or hot assets. What is the amount and character of Locke's recognized gain or loss? What is Locke's ending basis in his partnership interest?


Definitions:

Treasury Bill

Short-term government securities issued at a discount from the face value and paying no interest, maturing usually in one year or less.

Issue Price

The price at which new securities are offered to the public by the issuer.

Simple Interest

Interest calculated only on the initial principal of a loan or deposit, without compounding.

Annually

Refers to something that happens once every year.

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