At the beginning of the year, Heather's "tax basis" capital account balance in the HEP Partnership was $85,000 . During the tax year, Heather contributed property with a basis of $6,000 and a fair market value of $10,000 . Her share of the partnership's ordinary income and separately stated income and deduction items was $40,000 . At the end of the year, the partnership distributed $15,000 of

cash to Heather. In addition, the partnership allocated $12,000 of recourse debt and $10,000 of nonrecourse debt to Heather. What is Heather's ending capital account balance determined using the "tax basis" method?
a. $116,000
b. $120,000
c. $126,000
d. $128,000
e. $138,000

a
RATIONALE: Heather's beginning capital account balance of $85,000 is "rolled forward" by adding the basis of the property she contributed ($6,000) and her share of partnership income ($40,000), and subtracting the distribution to her ($15,000). Liabilities are not included in the partner's capital account.