Clark and Lewis Are Partners Who Share the Profits and Losses

question 42

Essay

Clark and Lewis are partners who share the profits and losses of the C&L Partnership 60% and 40%, respectively. The tax basis of each partner's interest in the partnership as of December 31 of last year was as follows: Clark, $14,000; Lewis, $12,000. During the current year, the partnership had ordinary income of $20,000 and a long-term capital loss of $10,000 from the sale of securities. The partnership made cash distributions proportionately to the two partners during this year totaling $20,000. What is the amount of Lewis's tax basis of his partnership interest on December 31 of the current year?

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Definitions:

Iroquois Nation

A historically powerful northeast Native American confederacy in North America, known for the Iroquois League which consisted of six nations.

French and Indian War

A conflict from 1754 to 1763 between Britain and France in North America, part of the larger Seven Years' War, involving Native American allies on both sides.

Ohio Valley

A geographical region in the United States that encompasses parts of the states around the Ohio River, including parts of Ohio, Kentucky, Indiana, and Pennsylvania.

Comanche

A Native American tribe historically located in what is now Texas, Oklahoma, and New Mexico, known for their horseback riding and warrior skills.