At the beginning of the year, Ryan's capital account balance in the RUS Partnership (in which Ryan owned a 40% interest) was $200,000 . During the year Ryan contributed cash ($40,000) and property (basis = $20,000, fair market value = $30,000). RUS reported ordinary income of $100,000 and tax-exempt income of $6,000 . At the end of the year, the partnership distributed $6,000 of cash to Ryan. On

the Schedule K-1, the partnership shows that Ryan had a $50,000 share of nonrecourse LLC debt at the end of the year. Using the tax basis method, how much is Ryan's ending capital account balance?
a. $294,000.
b. $296,400.
c. $306,400.
d. $344,000.
e. $346,400.

b
RATIONALE: Ryan's beginning capital account balance of $200,000 is "rolled forward" by adding the contributed cash ($40,000) plus the basis of the property he contributed ($20,000). It is also increased by Ryan's share of partnership income ($40,000) and tax-exempt interest income ($2,400). It is reduced by the distribution to Ryan ($6,000). Liabilities are not included in the partner's capital account.