Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year. Aaron and Deanne each contributed $110,000 and Keon transferred an acre of undeveloped land to the partnership. The land had a tax basis of $70,000 and was appraised at $180,000. The land was also encumbered with a $70,000 non-recourse mortgage for which no one was personally liable. All three partners agreed to split profits and losses equally. At the end of the first year Blue Bell made a $7,000 principal payment on the mortgage. For the first year of operations, the partnership records disclosed the following information:
Sales revenue $470,000
Cost of goods sold $410,000
Operating expenses $70,000
Long-term capital gains $2,400
- 1231 gains $900
Charitable contributions $300
Municipal bond interest $300
Salary paid as a guaranteed payment to Deanne (not included in expenses) $3,000
Complete the following below:
- Compute the adjusted basis of each partner’s interest in the partnership immediately after the formation of the partnership in an excel spreadsheet.
- Prepare Blue Bells’ Partnership tax return page 1 and Schedule K for its first year of operations along with Schedule K-1 for Deanne.