On January 1,20X9,Mr The $3,000 of Interest Was Paid on a $60,000 Loan

Essay

On January 1,20X9,Mr.Blue and Mr.Grey each contributed $100,000 to form the B&G general partnership.Their partnership agreement states that they will each receive a 50% profits and loss interest.The partnership agreement also provides that Mr.Blue will receive an annual $36,000 guaranteed payment.B&G began business on January 1,20X9.For its first taxable year,its accounting records contained the following information:
$\begin{array}{lll}\text { Gross receipts from sales } & \$ & 150,000 \\\text { Cost of sales } & \$ & (220,000) \\\text { Gross profit } & \$ & (70,000) \\\text { Guaranteed payments to Mr. Blue } & \$ & (36,000) \\\text { Interest paid on business debt } & \$ & (3,000) \\\text { Dividend income } & \$ & 500 \\\text { Tax exempt interest } & \$ & 1,500 \\\text { Operating expenses } & \$&(138,000) \\\text { Depreciation expense } & \$ & (9,000) \\\text { Sec. } 1231 \text { Gains } & \$ & 8,000\end{array}$ The $3,000 of interest was paid on a $60,000 loan made to B&G by Key Bank on June 30,20X9.B&G repaid $10,000 of the loan on December 15,20X9.Neither of the partners received a cash distribution from B&G in 20X9.
Complete the following table related to Mr.Blue's interest in B&G partnership:
$\begin{array}{lccc} \text { Item } & \text { Amount} \\ \text { Mr. Blue's ordinary business income (loss) allocation for 20X 9 } \\ \text { Mr. Blue's self-employment earnings (loss) for 20X9 } \\ \text { Mr. Blue's tax basis in his B \&G interest on December 31, 20X9 } \\\end{array}$