Doug Purchases a 20% Interest in the Quix Partnership for $10,000

question 16

Essay

Doug purchases a 20% interest in the Quix Partnership for $10,000 on January 1, 2019, and begins to materially participate in the partnership's business. The Quix Partnership uses the calendar year as its tax year. At the time of the purchase, the Quix Partnership has $4,000 in liabilities, and Doug's share is 20%. What is Doug's basis in his partnership interest on January 1, 2010?

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Definitions:

Financial Asset

Any asset that is cash, an ownership interest in an entity, or a contractual right to receive or deliver cash or another financial instrument.

Pension Reserves

Funds that are set aside by a corporation or government to support its future pension obligations to its employees.

Mutual Fund Shares

Units of ownership in a mutual fund, which pools money from many investors to purchase a diversified portfolio of securities.

Corporate Equity

The ownership interest represented by shares of a company's stock.