The TimpRiders LP has operated a motorcycle dealership for a number of years. Lance is the limited partner, Francesca is the general partner, and they share capital and profits equally. Francesca works full time managing the partnership. Both the partnership and the partners report on a calendar-year basis. At the start of the current year, Lance and Francesca had bases of $10,800 and $3,200, respectively, and the partnership did not have any liabilities. During the current year, the partnership reported the following results from operations: Net sales Cost of goods sold Operating expenses Short-term capital loss Tax-exempt interest $1231 gain $ 657,000 502,000 166,000 2,600 2,200 6,200 On the last day of the year, the partnership distributed $3,200 each to Lance and Francesca. mprehensive Problem 20-81 Part 1 (Algo) Vhat outside basis do Lance and Francesca have in their partnership interests at the end of the year? How much of their losses are currently not deductible by Lance and Francesca because of the tax-basis limitation? o what extent does the passive activity loss limitation apply in restricting their deductible losses for the year? all the requirements, negative amounts should be entered with a minus sign. Leave no answer blank. Enter zero if applic Lance Francesca Year end basis Loss limited by tax basis Loss limited by passive activity
The TimpRiders LP has operated a motorcycle dealership for a number of years. Lance is the limited partner, Francesca is the general partner, and they share capital and profits equally. Francesca works full time managing the partnership. Both the partnership and the partners report on a calendar-year basis. At the start of the current year, Lance and Francesca had bases of $10,800 and $3,200, respectively, and the partnership did not have any liabilities. During the current year, the partnership reported the following results from operations: Net sales Cost of goods sold Operating expenses Short-term capital loss Tax-exempt interest $1231 gain $ 657,000 502,000 166,000 2,600 2,200 6,200 On the last day of the year, the partnership distributed $3,200 each to Lance and Francesca. mprehensive Problem 20-81 Part 1 (Algo) Vhat outside basis do Lance and Francesca have in their partnership interests at the end of the year? How much of their losses are currently not deductible by Lance and Francesca because of the tax-basis limitation? o what extent does the passive activity loss limitation apply in restricting their deductible losses for the year? all the requirements, negative amounts should be entered with a minus sign. Leave no answer blank. Enter zero if applic Lance Francesca Year end basis Loss limited by tax basis Loss limited by passive activity
Chapter21: Partnerships
Section: Chapter Questions
Problem 2BCRQ
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Transcribed Image Text:The TimpRiders LP has operated a motorcycle dealership for a number of years. Lance is the limited partner, Francesca is
the general partner, and they share capital and profits equally. Francesca works full time managing the partnership. Both
the partnership and the partners report on a calendar-year basis. At the start of the current year, Lance and Francesca had
bases of $10,800 and $3,200, respectively, and the partnership did not have any liabilities. During the current year, the
partnership reported the following results from operations:
Net sales
$ 657,000
Cost of goods sold
Operating expenses
Short-term capital loss
Tax-exempt interest
$1231 gain
502,000
166,000
2,600
2,200
6,200
On the last day of the year, the partnership distributed $3,200 each to Lance and Francesca.
Comprehensive Problem 20-81 Part 1 (Algo)
a. What outside basis do Lance and Francesca have in their partnership interests at the end of the year?
b. How much of their losses are currently not deductible by Lance and Francesca because of the tax-basis limitation?
c. To what extent does the passive activity loss limitation apply in restricting their deductible losses for the year?
(For all the requirements, negative amounts should be entered with a minus sign. Leave no answer blank. Enter zero if applicable.)
Lance
Francesca
a. Year end basis
b. Loss limited by tax basis
c. Loss limited by passive activity
Expert Solution
Step 1
To calculate a partner's exact tax liability, the relevant tax regulations require each partner to estimate their adjusted basis. This calculation is usually done at the end of the year and is crucial for determining the distributive share of profits or losses for each partner.
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