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I thought the dividends of 12,000 (40,000 x 30%) should be subtracted from the net income distribution of 39,000 (130,000 x 30%) and then subtract the depreciation expense in order to get to the final number. Is there any reason why the dividend is not part of the calculation?
Never in the question does it explain that a dollar for dollar reduction upon the 50,000 residual based failure of a collection of AR. Are we just supposed to know that? Seem, unclear at best. If you read the question. I would seem the total 50,000 would be forfeited. I guess my concern is too often in these CPA questions there are assumptions made that the reader understand exactly what the question is asking but, like this example, it was not as clear at it may seem.
I thought the new partners had to control 80% or more for contributions to a partnership to be nontaxable. Since this one doesn't qualify, I thought the basis for the new partner would be the fair value (minus liability taken on by other partners).