Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year. Aaron and Deanne each contributed $110,000 and Keon transferred an acre of undeveloped land to the partnership. The land had a tax basis of $70,000 and was appraised at $180,000. The land was also encumbered with a $70,000 non-recourse mortgage for which no one was personally liable. All three partners agreed to split profits and losses equally. At the end of the first year Blue Bell made a $7,000 principal payment on the mortgage. For the first year of operations, the partnership records disclosed the following information:

Sales revenue $470,000

Cost of goods sold $410,000

Operating expenses $70,000

Long-term capital gains $2,400

  • 1231 gains $900

Charitable contributions $300

Municipal bond interest $300

Salary paid as a guaranteed payment to Deanne (not included in expenses) $3,000

Complete the following below:

  • Compute the adjusted basis of each partner’s interest in the partnership immediately after the formation of the partnership in an excel spreadsheet.
  • Prepare Blue Bells’ Partnership tax return page 1 and Schedule K for its first year of operations along with Schedule K-1 for Deanne.