Reference no: EM132118727

Partnership Taxable Income

Partner D is a 10 percent general partner in ABCD Partnership. The partnership's financial records for the current tax year reveal the following:

Gross receipts from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $820,000

Cost of sales  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (540,000)

Operating expenses  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  (93,000)

Net income from rental real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . .   64,000

Dividend income  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20,000

Business meals and entertainment  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  (8,200)

Section 1231 loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  (17,500)

D's outside basis in his partnership interest was $125,000 at the beginning of the tax year.

1. Using Form 1065, page 1 as a guide, calculate the partnership's ordinary income/loss for the current tax year.

2. Determine D's capital account the partnership at the end of the tax year.

Partnership Transactions: Partner and Partnership

Partnership EFGH is a calendar year, accrual basis partnership. Partner G is a calendar year, cash basis partner. Partnership EFGH rents property from Partner G. EFGH pays market rate rent of $4,000 per month. EFGH also pays G a guaranteed payment of $10,000 per month for services performed.

The following transactions occurred near year end:
- The December rent payment for the current year was not received by G until January 5th of the subsequent year.
- The December guaranteed payment was not received by G until January 10th of the subsequent year

3. In what tax year should EFGH deduct the December rent payment and in what year should G include this payment in his tax return?

4. In what year should the EFGH deduct the December guaranteed payment and in what year should G include this payment in tax return?

Calculating Partnership Ordinary Income/Loss and Partner Taxable Income

Partner Q is a partner in Partnership QRST. The partnership agreement states that Q's share of income and losses is 30 percent. Q provides services to QRST. Both QRST and Q use a calendar year for tax purposes. The partnership's financial records for the current year show:

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $260,000

Guaranteed payments to Q. . . . . . . . . . . . . . . . . .    (20,000)

Life insurance premium for Q . . . . . . . . . . . . . . . . .    (500)

Operating expenses  . . . . . . . . . . . . . . . . . . . . . . .   (60,000)

Charitable contributions. . . . . . . . . . . . . . . . . . . . .    (9,000)

Net long-term capital gain. . . . . . . . . . . . . . . . . . .    10,000

Q is single, has no other income, and no itemized deductions for the year. Q received the $20,000 guaranteed payments and withdrew an additional $10,000 during the year. Q's capital account in the partnership was $50,000 at the beginning of the year.

5. Using Form 1065, page 1 as a guide; calculate QRST's ordinary income for the tax year.

6. Calculate T's taxable income for the tax year of 2012. T will not be able to itemize deductions.

7. Calculate T's capital account in the partnership at the end of the tax year.