Dan Purchases a 25% Interest in the Haymarket Partnership for $20,000

question 50

Essay

Dan purchases a 25% interest in the Haymarket Partnership for $20,000 on January 1,2010,and begins to materially participate in the partnership's business.The Haymarket Partnership uses the calendar year as its tax year.At the time of the purchase,the Haymarket Partnership has $2,000 in liabilities,and Dan's share is 25%.During the year,the Haymarket Partnership incurs $8,000 in losses and its liabilities increase by $4,000.What is Dan's basis in his partnership interest on December 31,2010?

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Definitions:

Accommodation

In psychology, the process of adapting cognitive schemas in response to new information.

Existing Schemes

Preexisting cognitive structures or frameworks in the mind that help individuals organize and interpret information.

Modify

To change or alter something, often to improve it or to adapt it to different conditions.

Cognitive Development

The process of growth and change in intellectual capabilities such as thinking, reasoning, and understanding.