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:

Percent Equivalent

A way to express fractions or decimals as percentages.

Rounded

The process of adjusting a numerical value to a specified degree of precision, often to the nearest whole number or decimal place.

Accurate

The degree to which a measurement, calculation, or specification conforms to the correct value or a standard.

Cent

A unit of currency equal to one hundredth of various countries’ basic units, often symbolized by a small coin.