Bobbie and Fran are partners in the Quick Freeze partnership, owning respectively 60 percent and 40 percent of the partnership's capital and profits. At the beginning of 2017, their bases in their partnership interests were $18,000 and $12,000, respectively. During the year, the partnership had the following items of income: partnership ordinary income, $30,000; long-term capital gains, $10,000; and tax-exempt income from municipal bond interest, $5,000. The partnership distributed $12,000 to Bobbie and $8,000 to Fran. Their respective bases in their partnership interests at the end of 2017 were:

Their respective bases in their partnership interests at the end of 2017 were $33,000 for Bobbie and $22,000 for Fran

Explanation:

In order to calculate Their respective bases in their partnership interests at the end of 2017 first we have to calculate the Income from partnership as follows:

Income from partnership=Ordinary income + long term capital gains + muncipal bond interest

=$30,000 + $10,000 + $5,000 = $45,000

Therefore, the computation of respective partnership interests at the end of 2017 would be as follows:

Amount (in $)

Particulars Bobbie Fran

(1) Opening interest in partnership $18,000 $12,000

(2) Add: - share of income (3:2) $27,000 $18,000

(3) Less:-Partnership distributed $12,000 $8,000

(4) Closing interest in partnership as

at the end of 2015 (1+2-3) = $33,000 $22,000

Their respective bases in their partnership interests at the end of 2017 were $33,000 for Bobbie and $22,000 for Fran