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:

Primary

In electrical systems, the initial or main input side of a transformer or circuit.

Center Tapped

A feature in transformers or electrical wires that allows for the creation of a neutral point by tapping into the middle of the windings or conductor.

Neutral Conductor

The grounded conductor of a power system. It is connected to ground potential and is considered a current-carrying conductor. The neutral is generally white or gray in color.

Equipment Ground

A safety connection designed to protect against electrical shocks by providing a path for fault current to flow to earth ground.