TAX 4001 FAU General Partnership and C Corporation Questions

Entity was formed several years ago. At the beginning of this year, Chris acquired a 35% interest in the Entity by transferring property worth $65,000 in which she had basis of $50,000. At the beginning of this year, the Entity had recourse debt of $200,000. This year, Chris loaned $20,000 (bona fide debt) to the Entity. The entity’s results for the year are as follows:

Loss from operations ($520,000)

LTCG 40,000

Municipal bond interest income 32,000

Charitable contributions 4,000

Interest expense related to muni bond 8,000

In addition, during the year, Chris received a distribution of $48,000. If the entity is a C corporation, the distribution is a dividend.

At the end of the year, the Entity’s balance sheet shows a recourse debt balance of $100,000. The Chris Loan balance remains unchanged.

Required:

1. Assume Entity is a General Partnership – Compute Chris’s outside basis.

2. Assume Entity is an S corporation – Compute Chris’s outside basis.

3. Assume Entity is a C corporation – Compute Chris’s outside basis.