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:

Machine-Hours

A measure of production output or activity level, representing the total hours that machinery is operating over a specific period of time.

Markup

The difference between the cost of a good or service and its selling price, expressed as a percentage over the cost.

Variable Manufacturing Overhead

Costs that vary with production volume, including indirect materials, indirect labor, and other expenses that increase or decrease with output.

Direct Labor-Hours

The complete tally of hours that employees dedicate to the manufacturing process.