Joey and Bob Each Have 50% Interest in a Partnership

question 122

Multiple Choice

Joey and Bob each have 50% interest in a Partnership.Both Joey and the partnership file returns on a calendar-year basis.Partnership Q had a $12,000 loss in 2016.Joey's adjusted basis in his partnership interest on January 1,2016,was $5,000.In 2017,the partnership had a profit of $10,000.Assuming there were no other adjustments to Joey's basis in the partnership,what amount of partnership income (loss) should Joey show on his 2016 and 2017 individual income tax returns?

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Definitions:

Fair Value Method

An accounting approach where assets and liabilities are reported at their current prices or the estimated amount they would fetch in the market.

Brokerage Fee

A charge levied by a broker for facilitating transactions between buyers and sellers.

Unrealized Gain

An increase in the value of an asset that has not been sold, hence the profit is not yet realized.

Trading Investments

Securities purchased and held primarily for selling them in the near term to generate income on short-term price differences.