Alfred, a One-Third Profits and Capital Partner in Pizzeria Partnership

Essay

Alfred, a one-third profits and capital partner in Pizzeria Partnership, needs help in adjusting his tax basis to reflect the information contained in his most recent Schedule K-1 from the partnership.Unfortunately, the Schedule K-1 he recently received was for Year 3 of the partnership, but Alfred only knows that his tax basis at the beginning of Year 2 of the partnership was $23,000.Thankfully, Alfred still has his Schedule K-1 from the partnership for Years 1 and 2.
Using the following information from Alfred's Year 1, Year 2, and Year 3 Schedule K-1, calculate his tax basis the end of Year 2 and Year 3.
$\begin{array}{c}\begin{array}{lll} \text {Year 1:}\\ \text {Ordinary business income}\\ \text {Cash distribution}\\ \text {Alfred's share of partnership debt}\\ \text {Guaranteed payment}\\ \text {Nondeductible expense}\\ \text {Tax-exempt income}\\ \text {Year 2:}\\ \text {Ordinary business loss}\\ \text {Cash contribution}\\ \text {Alfred's share of partnership debt}\\ \text {Guaranteed payment}\\ \text {Nondeductible expense}\\ \text {Tax-exempt income}\\ \text {Year 3:}\\ \text {Ordinary business loss}\\ \text {Alfred's share of partnership debt}\\ \text {Nondeductible expenses}\\ \text {Guaranteed payment}\\\end{array}\begin{array}{lr}\\\$ & 10,000 \\\$ & 7,000 \\\$ & 85,000 \\\$ & (4,500 \\\$ & (1,000) \\\$ & 1,200 \\\\\$ & (5,000) \\\$ & 10,000 \\\$ & 73,000 \\\$ & (7,500 \\\$ & (3,000) \\\$ & 1,500 \\& \\\$ & (13,000) \\\$ & 58,000 \\\$ & (3,000) \\\$ & (7,500 \end{array}\end{array}$