Capital Account Maintenance Rules

Question 1

Capital Account Rule #1

Answer 1

Increase capital account by the amount of cash contributed.

Question 2

Capital Account Rule #2

Answer 2

Increase capital account by fmv of contributed property, net of liabilities to which the contributed property is subject

Question 3

Capital Account Rule #3

Answer 3

Increase capital account by the partner’s distributive share of book income and gain.

Question 4

Capital Account Rule #4

Answer 4

Decrease capital account by the amount of cash distributed [cash withdrawals]

Question 5

Capital Account Rule #5

Answer 5

Decrease capital account by fmv of distributed property, net of liabilities which the distributive partner assumes.

Question 6

Capital Account Rule #6

Answer 6

Decrease capital account by the partner’s distributed share of EXPENDITURES that are not deductible and not subject to capitalization (no tax benefit).

Question 7

Capital Account Rule #7

Answer 7

Decrease capital account by the partner’s distributive share of DEDUCTIONS and LOSSES.