At the Beginning of the Year, Heather's "Tax Basis" Capital

question 5

Multiple Choice

At the beginning of the year, Heather's "tax basis" capital account balance in the HEP Partnership was $85,000. During the tax year, Heather contributed property with a basis of $6,000 and a fair market value of $10,000. Her share of the partnership's ordinary income and separately stated income and deduction items was $40,000. At the end of the year, the partnership distributed $15,000 of cash to Heather. Also, the partnership allocated $12,000 of recourse debt and $10,000 of nonrecourse debt to Heather. What is Heather's ending capital account balance determined using the "tax basis" method?

• A)$116,000
• B)$120,000
• C)$126,000
• D)$128,000
• E)$138,000

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Definitions:

Mercury

A chemical element with the symbol Hg and atomic number 80, known as quicksilver; a heavy, silvery d-block element that is liquid at room temperature.

Helium

A colorless, odorless, tasteless, inert gas that is the second lightest element and found in abundance in the universe.

Coinage Metals

Coinage metals refer to metals that historically have been used to make coins, primarily including gold, silver, and copper due to their corrosion resistance and ease of workability.

Copper

A ductile, malleable, reddish-brown metallic element with good electrical and thermal conductivity, used in electrical wiring and coinage.