Question

mustafa's tax basis in his partnership interest at the beginning of the year was $10,000. if his share of the partnership liabilities increased by $10,000 during the year and his share of partnership income for the year is $3,000, what is his tax basis in his partnership interest at the end of the year?

Answer 1

Mustafa's tax basis in his partnership interest at the end of the year is

$23,000.

What is tax basis?

Under U.S. federal tax law, the tax basis of an asset is generally its cost basis. Determining such cost may require allocations where multiple assets are acquired together. Tax basis may be reduced by allowances for depreciation. Such reduced basis is referred to as the adjusted tax basis.

How to determine mustafa's tax basis in his partnership interest at the end of the year?
From the question given,
Mustafa's tax basis in his partnership interest at the beginning of the year was $10,000

Then, his share of the partnership liabilities increased by $10,000 during the year

Lastly, his share of partnership income for the year is $3,000

Let's enter all the information into the tax basis formula as follows :

Tax basis

= Partnership at the beginning of the year + increase in partnership debt + share in partnership income for the year

= $10,000 + $10,000 + $3,000

= $23,000

Therefore, mustafa's tax basis in his partnership interest at the end of the year is $23,000.

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