Sharon and Sara Are Equal Partners in the S&S Partnership

question 14

Essay

Sharon and Sara are equal partners in the S&S Partnership. On January 1 of the current year, each partner's adjusted basis in S&S was $50,000 (including each partner's $15,000 share of the partnership's $30,000 of liabilities). During the current year, S&S repaid the $30,000 of liabilities and borrowed $20,000 for which Sharon and Sara are equally liable. In the current year ended December 31, S&S also sustained a net operating loss of $25,000 and earned $5,000 of interest income from investments. If liabilities are shared equally by the partners, on January 1 of the next year how much is each partner's basis in her interest in S&S?

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Definitions:

Consumer Goods

Items bought by the general public for personal use.

Capital Goods

Long-lasting goods used in the production of other goods or services, such as machinery, buildings, and equipment.

Consumer Goods

Products that are purchased for consumption by the average consumer.

Capital Goods

Long-lasting goods that are used in the production of other goods or services, such as buildings, machinery, and equipment.