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    Partner Reporting of Partnership Items

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    Please help with the following problems.

    Rocky and Charlie form RC Partnership as equal partners. Rocky contributes $100,000 into RC while Charlie contributes real estate with a fair market value of $100,000. During the current year, RC earned net income of $600,000. The partnership distributes $200,000 to each partner. The amount that Rocky should report on his individual tax return is
    A) $0.
    B) $100,000.
    C) $200,000.
    D) $300,000.

    AB Partnership earns $500,000 in the current year. Partners A and B are equal partners who do not receive any distributions during the year. How much income does partner A report from the partnership?
    A) $0
    B) $250,000
    C) $500,000
    D) None of the above.

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    Solution Preview

    Partners in partnerships must report their distributive portions of the partnership's net income whether they receive distributions or not. Distributions are not taxable unless they exceed the partner's basis, and basis is computed after including the current year's net income or loss and separately stated items.

    1. Rocky and Charlie ...

    Solution Summary

    This solution illustrates a partner's reporting of partnership items.