Rich is a partner in RKW partnership.Rich owned 50% through January 1,2017 through April 30,2017,when he bought Kevin's 25% interest.He owned 75% for the rest of the year (assume a 365-day year) .The partnership had ordinary income of $150,000 and $25,000 in long-term capital gains.Barring any special allocations in a partnership agreement,Rich's share of the income items is (round the answers up to the nearest whole dollar) :

A) $75,000 ordinary income;$12,500 capital gain.
B) $100,172 ordinary income;$16,696 capital gain.
C) $112,500 ordinary income;$18,750 capital gain.
D) $150,000 ordinary income;$25,000 capital gain.

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Zybrea Knight · Accepted Answer

Final Answer : B, Explanation :  Rich's share of the income is calculated based on his ownership percentage throughout the year. For the first 120 days (January 1 to April 30), he owns 50% of the partnership, and for the remaining 245 days (May 1 to December 31), he owns 75%. The calculation for each income type is as follows:Ordinary income share = [(50% * $150,000 * 120/365) + (75% * $150,000 * 245/365)] = $100,172 (rounded up)Capital gain share = [(50% * $25,000 * 120/365) + (75% * $25,000 * 245/365)] = $16,696 (rounded up)

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