The KL Partnership is owned equally by Kayla and Lisa. At the beginning of the year, Kaylaâs basis is $20,000 and Lisaâs basis is $16,000. Partnership debt did not change from the beginning to the end of the tax year. KL reported the following income and expenses for the current tax year.
Sales revenue $100,000 Cost of sales 80,000 Distribution to Lisa 15,000 Depreciation expense 20,000 Utilities 14,000 Rent expense 18,000 Long-term capital gain 6,000 Payment to Mercy Hospital for Kayla's medical expenses 12,000
If required, use the minus sign to indicate an ordinary business loss. If an answer is zero, enter "0".
a. Prepare an Excel spreadsheet that could be used by a CPA firm to accumulate KLâs information that would be reported on Form 1065, page 1 [Ordinary business income (loss)] and page 4 (Schedule K).
Using your spreadsheet as a source document, answer the following.
How much is the partnershipâs ordinary business income (loss) on page 1?
$.
What amount is shown on lines 1, 9a and 20 on Schedule K?
Line 1: $
Line 9a: $ 6,000
Line 20: $
b. Use the ordering rules of Exhibit 21.2 (and the loss limitation rules), and calculate Kaylaâs basis in her partnership interest at the end of the year.
Basis before loss allocation: $
Ordinary loss allowed under § 704(d): $
Ending basis in interest: $
Based on this calculation, what does Kayla report on her tax return?
She reports a long-term capital gain of $$__ and ordinary income of $$_
Feedback
Partially correct
c. Use the ordering rules of Exhibit 21.2 (and the loss limitation rules), and calculate Lisa âs basis in her partnership interest at the end of the year.
Basis before loss allocation: $
Ordinary loss allowed under § 704(d): $
Ending basis in interest: $
Based on this calculation, what does Lisa report on her tax return?
She reports a long-term capital gain of $ and ordinary loss of $$
d. Do the amounts you calculated in part (b) and part (c) equal the amounts shown on your Excel spreadsheet?
Yes/NO , because the spreadsheet can only be used is use to determine amounts at the partner level as long as the loss is suspended .
The KL Partnership is owned equally by Kayla and Lisa. At the beginning of the year, Kaylaâs basis is $20,000 and Lisaâs basis is $16,000. Partnership debt did not change from the beginning to the end of the tax year. KL reported the following income and expenses for the current tax year.
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If required, use the minus sign to indicate an ordinary business loss. If an answer is zero, enter "0".
a. Prepare an Excel spreadsheet that could be used by a CPA firm to accumulate KLâs information that would be reported on Form 1065, page 1 [Ordinary business income (loss)] and page 4 (Schedule K).
Using your spreadsheet as a source document, answer the following.
How much is the partnershipâs ordinary business income (loss) on page 1?
$.
What amount is shown on lines 1, 9a and 20 on Schedule K?
Line 1: $
Line 9a: $ 6,000
Line 20: $
b. Use the ordering rules of Exhibit 21.2 (and the loss limitation rules), and calculate Kaylaâs basis in her partnership interest at the end of the year.
Basis before loss allocation: $
Ordinary loss allowed under § 704(d): $
Ending basis in interest: $
Based on this calculation, what does Kayla report on her tax return?
She reports a long-term capital gain of $$__ and ordinary income of $$_
Feedback
Partially correct
c. Use the ordering rules of Exhibit 21.2 (and the loss limitation rules), and calculate Lisa âs basis in her partnership interest at the end of the year.
Basis before loss allocation: $
Ordinary loss allowed under § 704(d): $
Ending basis in interest: $
Based on this calculation, what does Lisa report on her tax return?
She reports a long-term capital gain of $ and ordinary loss of $$
d. Do the amounts you calculated in part (b) and part (c) equal the amounts shown on your Excel spreadsheet?
Yes/NO , because the spreadsheet can only be used is use to determine amounts at the partner level as long as the loss is suspended .
