One member's outside basis moves from [$30,000] to zero in AC507's third-unit problem, with the distribution posted before the loss and $8,000 of that loss carried forward. Searches like "ac 507 unit 3 assignment example", "ac507 unit 3 sample" and "ac507 unit 3 example" land here.
What a finished AC507 Unit 3 partnership basis problem looks like
A single schedule with a facts block above it and a carryforward note beneath. The facts give Lauren's opening basis of [$30,000], [$20,000] of it her share of partnership debt, and the gym's year: a [$160,000] ordinary loss, [$15,000] of long-term capital gain on sold equipment, [$5,000] of tax-exempt municipal interest, an [$8,000] cash distribution to her and a [$10,000] cash contribution from her in March. Partnership liabilities rise from [$50,000] to [$90,000]. The schedule then moves in three blocks. Increases lift her basis to $64,000: the contribution, $6,000 of capital gain, $2,000 of exempt interest and a $16,000 rise in her liability share, treated as money contributed under Section 752(a). The distribution takes it to $56,000. Only then does her $64,000 share of the loss arrive.
How a AC507 Unit 3 example is structured
Order is the substance of this problem, and the schedule follows the one Section 705 and the regulations under Section 704(d) set. Every item that raises basis is posted before the distribution, the liability increase included. The distribution is posted next, reducing basis without gain under Section 731(a) because $8,000 is less than the $64,000 then available. The loss is tested last against the $56,000 that remains, so $56,000 is allowed and $8,000 is suspended and carried forward. Why the exempt interest raises basis at all gets its own paragraph: without that increase, a later distribution of the same cash would be taxed even though the income never was. Character stays separate throughout, the capital gain on its own K-1 line. A final block lists the gates the allowed loss still faces, at-risk, passive and excess business loss, in statutory order.
Debt share as a contribution
Lauren's portion of partnership liabilities climbs from $20,000 to $36,000, and Section 752(a) treats the $16,000 difference exactly like cash she paid in.
Exempt income still counts
The $2,000 of municipal interest never reaches her taxable income, yet it raises basis so that a later distribution of that cash stays untaxed.
The withdrawal before the loss
Posting the $8,000 distribution ahead of the loss follows the regulations and Revenue Ruling 66-94, and it is the reason basis cannot cover the whole loss.
Suspended, not forfeited
The $8,000 of loss above basis carries forward under Section 704(d) with no expiration and is allowed in any later year her basis rises.
Three gates after basis
At-risk amount, passive activity status and the excess business loss cap are named in the order the Code applies them, each computation left to a later prompt.
Where marks go in AC507 Unit 3
Credit on the basis problem rests largely on sequence. A schedule that deducts the loss before the distribution allows the full $64,000 and then drives basis negative, or forces gain on a withdrawal that should have been tax-free; either way the ordering rule was ignored. Forgetting the liability increase is nearly as expensive, since that single $16,000 line decides how much loss survives. Some submissions omit the tax-exempt interest because it appears on no return line, others subtract it; both break the ending figure. Treating the suspended $8,000 as lost for good misreads Section 704(d). Capital gain folded into ordinary income loses character credit even when the arithmetic is right. Uncited lines read as unsupported, and an opening balance never split into debt and equity leaves the liability change unverifiable.
Get a AC507 Unit 3 example written to your instructions
The Unit 3 facts, the member whose basis is tracked, her opening balance and any debt figures, with the grading rubric, give the schedule all it needs. It is built in regulatory order with a citation on each line, suspended amounts carried forward, and it comes back within 24-48h. There is no fee on a first custom sample.
AC507 Unit 3 questions, answered
Why does a bigger partnership loan raise one member's basis?
Section 752(a) treats an increase in a partner's share of partnership liabilities as a contribution of money, and Section 722 adds contributed money to basis. The logic is that she will eventually bear or repay her share, so the loan is part of her investment. A decrease works the other way, as a deemed distribution, which is why refinancing or paying down debt can trigger gain.
What happens to the suspended loss next year?
It carries forward and is allowed at the end of a later year to the extent Lauren's basis then permits. A new contribution, a share of income or a further rise in debt would each create room. A two-line note in the example shows that an [$8,000] share of next year's profit would free the whole suspended amount, since prompts often extend the problem by one year.
Is the capital account the same thing as basis?
No, and the example keeps them apart. The capital account reported on the K-1 excludes liability shares, while outside basis includes them. Lauren's capital account can be negative when her basis is zero or positive, which confuses many first attempts. Some rubrics ask for both figures; when yours does, the example adds a reconciling line that moves from one to the other through her debt share.