11.On 1/1/20, B joined with A and C to form the XYZ partnership. B contributed property that had been purchased for 10 million long ago, that was now worth 6 million, even if it was fully depreciated by B. B’s share of the profits was to be 20%. A contributed land with a $600,000 mortgage on it. This table contains the yearly results attained by XYZ. Complete the last two columns (15 points): Year Ending XYZ Profits XYZ debt balance at year end Distributions to partners* B’s taxable income B’s partnership basis at year end 2020 2,000,000 1,000,000 400,000 2021 2,000,000 3,000,000 400,000 2022 3,000,000 500,000 1,000,000 2023 3,000,000 0 200,000 2024 4,000,000 2,000,000 100,000 *All are proportionate for all partners except 2022 which went only to A and 2023 which went all to B
To complete the table, we need to consider the partnership tax rules. B's taxable income from the partnership will be his share of the profits, adjusted for any additional deductions or income items specific to him, and considering the distributions. B's partnership basis will start with his initial contribution and will be adjusted annually by his share of the partnership's income, additional contributions, distributions, and the partnership's liabilities. Let's assume B's initial basis is the fair market value of the property he contributed ($6 million), as it was fully depreciated. This is a simplified assumption, as the actual basis could be more complex to calculate depending on previous depreciation methods and other factors. Here's how B's taxable income and partnership basis might be calculated for each year: **2020:** - B's Taxable Income: 20% of $2,000,000 (XYZ Profits) = $400,000. - B's Partnership Basis: $6,000,000 (initial basis) + $400,000 (share of profits) - $80,000 (20% of $400,000 distributions) + $200,000 (20% of $1,000,000 increase in debt) = $6,520,000. **2021:** - B's Taxable Income: 20% of $2,000,000 (XYZ Profits) = $400,000. - B's Partnership Basis: $6,520,000 (previous year
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