Explore BrainMass
Share

Partnership Income Taxation

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Diamond Co. and Bill are equal partners in the calendar year F & F Partnership. Diamond Co. uses a fiscal year ending June 30, and Bill uses a calendar year. Diamond Co. receives an annual guaranteed payment of $50,000. F & F's taxable income (after deducting Diamond Co.'s guaranteed payment) is $40,000 for 2009 and $50,000 for 2010.
a. What is the amount of income from the partnership that Diamond Co. must report for its tax year ending June 30, 2010?
b. What is the amount of income from the partnership that Bill must report for her tax year ending December 31, 2010?
c. Assume Diamond Co.'s annual guaranteed payment is increased to $60,000 starting on January 1, 2010, and the partnership's taxable income for 2009 and 2010 (after deducting Diamond Co.'s guaranteed payment) is the same (Le., $40,000 and $50,000, respectively). What is the amount of income from the partnership that Diamond Co. must report for its tax year ending June 30, 2010?

© BrainMass Inc. brainmass.com October 25, 2018, 8:59 am ad1c9bdddf
https://brainmass.com/business/accounting/partnership-income-taxation-559943

Solution Preview

a. What is the amount of income from the partnership that Diamond Co. must report for its tax year ending June 30, 2010?

$50,000 + 50% of $40,000 = 50,000 + 20,000 = $70,000
Guaranteed payment + half of taxable income, since they are equal partners = total amount of income reported from the partnership.

b. What is the amount of income from the partnership that Bill must report for her tax year ending December 31, 2010?

$50,000 x .50 = $25,000
Taxable ...

Solution Summary

This solution calculates the partnership income for the partnership and also for Bill (a & b), and also calculates the income for question C. All calculations are shown and explained.

$2.19
See Also This Related BrainMass Solution

Income tax: Partnership basis for Sarah and Bart

On January 1 of the current year, Sarah and Bart form an equal partnership. Sarah makes a cash contribution of $60,000 and a property contribution (adjusted basis of $160,000; fair market value of $140,000) in exchange for her interest in the partnership. Bart contributes property (adjusted basis of $120,000; fair market value of $200,000) in exchange for his partnership interest. Which of the following statements is true concerning the income tax results of this partnership formation?

a. Sarah has a $200,000 tax basis for her partnership interest.
b. The partnership has a $140,000 adjusted basis in the property contributed by Sarah.
c. Bart recognizes an $80,000 gain on his property transfer.
d. Bart has a $120,000 tax basis for his partnership interest.
e. None of the statements is true.

View Full Posting Details