In January, Daryl and Louis form a partnership with each contributing $75,000 in cash. The partnership agreement provides that Daryl would receive a guaranteed payment for salary of $20,000 and that partnership profits and losses (computed after deducting Daryl's salary) would be shared equally. For the year, the partnership's operations result in an $18,000 ordinary loss after payment of Daryl's
guaranteed payment. The partnership has no outstanding liabilities at year-end. What is the basis amount of Daryl's partnership interest at year-end?
What will be an ideal response?
Daryl's basis would be unaffected by the guaranteed payment. It would be reduced by $9,000 for the portion of the ordinary loss that he is allocated and would total $66,000 ($75,000 - $9,000).
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