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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 pro?t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $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.

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

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

3. Calculate T’s capital account in the partnership at the end of the tax year.

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M92040995

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