Problem -
Wiley Coyote also operates a mobile telephone dealership, Rocketfone, in partnership with Ralph Sheepdog from premises owned by Wiley. A partnership agreement specifies that all income and losses are to be shared in the ratio of 2:1. Transactions recorded by the partnership during 2015/16 were as follows.
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Receipts
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$
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Income from trading
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396,000
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Fully franked dividends from Investopedia Ltd
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28,000
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Proceeds from sale of shares in Lamb Supreme Ltd*
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7,000
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|
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Payments
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|
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Trading stock and overheads
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84,000
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Salary paid to Wiley
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75,000
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Salary to Anita Coyote**
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45,000
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Rent paid to Wiley (includes $30,000 paid on 30 June 2016 for 12 months in advance)
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55,000
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Interest paid to Ralph on loan
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17,000
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Interest on capital paid to Wiley
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15,000
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Interest on capital paid to Ralph
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12,000
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Superannuation contributed on behalf of Wiley
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24,000
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* the shares had been purchased in 2012 for $1,000
** Thecommissioner has issued a private ruling indicating that a salary of $45,000 was reasonable.
Required: With full explanation:
(i) Determine the net income of the Rocketfone;
(ii) Determine the distribution of the net income to the partners: and
(iii) List any other items that you believe should be considered in the preparation of Wiley's tax return.