Question

Mervin March and George Gamble are equal partners. On January 1, 2018, each had an adjusted basis in the partnership of $10,000. During 2018, the partnership borrowed $15,000, for which the partners are liable, and had an operating loss for the year of $20,000. What is the basis of each partner's interest at the end of 2018?

Answer 1

As said in the question the partners are having equal partnership.

So the partners has equal adjusting interest of $10000.

So here we take assumption that the profits and loss are equally to both of the partners.

Here the amount borrowed $15000 for this the partners are liable.

The operating loss to the partnership for this year is $20000

Here all the borrowed amount to he paid by partners and operating loss to be bear by partners together on equal basis.

So each partner has adjusted basis of $10000 each it means totally $20000

From that $20000 they have to pay $15000

And rest of the operating loss yi be transfered to partners capital account equally by transferring 10000 to each partner then our partners capitals goes to negative balances of $7500 each to both the partners .

So they have to bring that $7500 each into the partnership.

The interest of partners at the end of the year is negative balance of $7500 each to both of them.

I hope all the above given information is useful to you .

Thank you.