Asked by Mason Smith on May 10, 2024
Verified
Rita has a beginning basis in a partnership of $43,000.Rita's share of income and expense from the partnership consists of the following amounts:
Ordinary income $36,000 Guaranteed payment 18,000 Long-term capital gain 22,500 §1231 gain 5,700 Charitable contributions 5,600 §179 expense 23,000 Cash distribution 12,000\begin{array}{lr}\text { Ordinary income } & \$ 36,00 0\\\text { Guaranteed payment } & 18,000 \\\text { Long-term capital gain } & 22,500 \\\text { §1231 gain } & 5,700\\\text { Charitable contributions } & 5,600 \\\text { §179 expense } & 23,00 0\\\text { Cash distribution } & 12,000\end{array} Ordinary income Guaranteed payment Long-term capital gain §1231 gain Charitable contributions §179 expense Cash distribution $36,00018,00022,5005,7005,60023,00012,000 a.What items are separately stated?
b.What is Rita's self-employment income?
c.Calculate Rita's partnership basis at the end of the year.
§1231 Gain
A type of gain that arises from the sale of property used in a trade or business, which is subject to favorable capital gains tax rates if held for more than one year.
Self-Employment Income
Income generated by an individual directly from one's own business, trade, or profession, rather than from an employer.
Partnership Basis
The amount of a partner's investment in a partnership for tax purposes, affecting how they report income, gains, and losses.
- Comprehend the taxation process for partnership revenue, highlighting normal income, guaranteed remunerations, and particular allotments.
- Distinguish independently listed elements and comprehend their disclosure on partners' income tax filings.
- Comprehend the distribution of income and expenses among partners within a partnership.
Verified Answer
Long-term capital gain
§ 1231 gain
Charitable contributions
§ 179 expense
b. Ordinary income $36,000 Guaranteed payment 18,000§179 expense (23,000) Self-employment income 31,000\begin{array}{lr}\text { Ordinary income } & \$ 36,000 \\\text { Guaranteed payment } & 18,000 \\\S 179 \text { expense } & (23,000) \\\text { Self-employment income } & 31,000\end{array} Ordinary income Guaranteed payment §179 expense Self-employment income $36,00018,000(23,000)31,000
c. Beginning basis 43,000 Income 36,000 LTCG 22,500 §1231 gain 5,700 Charitable contribution (5,600)§179 expense (23,000) Cash distribution (12,000) Ending basis 66,600\begin{array}{lr}\text { Beginning basis } & 43,000 \\\text { Income } & 36,000 \\\text { LTCG } & 22,500 \\\text { §1231 gain } & 5,700\\\text { Charitable contribution }&(5,600)\\\S 179 \text { expense }&(23,000)\\\text { Cash distribution }&(12,000)\\\text { Ending basis }&66,600\end{array} Beginning basis Income LTCG §1231 gain Charitable contribution §179 expense Cash distribution Ending basis 43,00036,00022,5005,700(5,600)(23,000)(12,000)66,600
Learning Objectives
- Comprehend the taxation process for partnership revenue, highlighting normal income, guaranteed remunerations, and particular allotments.
- Distinguish independently listed elements and comprehend their disclosure on partners' income tax filings.
- Comprehend the distribution of income and expenses among partners within a partnership.
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