In January, Daryl and Louis Form a Partnership with Each

question 56

Essay

In January, Daryl and Louis form a partnership with each contributing $75,000 in cash. The partnership agreement provides that Daryl would receive a guaranteed payment for salary of $20,000 and that partnership profits and losses (computed after deducting Daryl's salary)would be shared equally. For the year, the partnership's operations result in an $18,000 ordinary loss after payment of Daryl's guaranteed payment. The partnership has no outstanding liabilities at year-end. What is the basis amount of Daryl's partnership interest at year-end?

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Definitions:

Pervasiveness

The quality or state of being widespread in every aspect or area.

Teratogens

Agents or factors that can cause developmental malformations or birth defects in an embryo or fetus when exposed during pregnancy.

Mutagens

Agents, such as chemicals or radiation, that can cause mutations by altering the DNA sequence within genes.

Carcinogens

Substances or exposures that are known to cause cancer or significantly increase the risk of developing cancer.