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This project covers general partnership basis issues including computation of partners' adjusted basis, determination of current$-$year tax position, preparation of tax forms, and creation of a memo to the partners with an analysis of their current$-$year tax issues and changes to basis.

In the current year, Mary, Andrew, and Paul formed Venezia General Partnership. Mary contributed $$55,000$ cash, Andrew contributed $$55,000,$ and Paul contributed land with a cash basis of $$70,000$ and a fair market value of $$180,000.$ The partnership assumed a $$70,000$ mortgage on the land; no partner is personally liable for the mortgage. At the end of the current year, Venezia made a $$7,000$ payment on the mortgage. Mary, Andrew, and Paul will split all profits and losses equally.

Current$-$year operations had the following results:

Sales revenue: $$260,000$

Cost of goods sold: $$205,000$

Operating expenses: $$35,000$

Long$-$term capital gains: $$1,200$

Section $1231$ Gains: $$450$

Charitable contributions: $$350$

Municipal bond interest: $$150$

Salary paid as a guaranteed payment to Andrew $($not included in expense$)$: $$1,500$

Part A: Determine Basis

Using Thomson Reuters, find a court case discussing partners' basis in the partnership interest. Summarize the court case and tax law relating to basis calculations.

Using the information summarized, determine Mary's, Andrew's, and Paul's initial basis in the partnership interest and the basis for each partner at the end of the current year. These calculations should be $1$ page.

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