Module 06 Written Assignment – Partnership Tax Problems
Partnership Taxable Income
Partner D is a 10 percent general partner in ABCD Partnership. The partnership’s financial records for the current tax year reveal the following:
Gross receipts from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $820,000
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (540,000)
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (93,000)
Net income from rental real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,000
Dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Business meals and entertainment . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,200)
Section 1231 loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,500)
D’s outside basis in his partnership interest was $125,000 at the beginning of the
tax year.
- Using Form 1065, page 1 as a guide, calculate the partnership’s ordinary income/loss for the current tax year.
- Determine D’s capital account the partnership at the end of the tax year.
Partnership Transactions: Partner and Partnership
Partnership EFGH is a calendar year, accrual basis partnership. Partner G is a calendar year, cash basis partner. Partnership EFGH rents property from Partner G. EFGH pays market rate rent of $4,000 per month. EFGH also pays G a guaranteed payment of $10,000 per month for services performed.
The following transactions occurred near year end:
- The December rent payment for the current year was not received by G until January 5th of the subsequent year.
- The December guaranteed payment was not received by G until January 10th of the subsequent year
- In what tax year should EFGH deduct the December rent payment and in what year should G include this payment in his tax return?
- In what year should the EFGH deduct the December guaranteed payment and in what year should G include this payment in tax return?
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 profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $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.
- Using Form 1065, page 1 as a guide; calculate QRST’s ordinary income for the tax year.
- Calculate T’s taxable income for the tax year of 2012. T will not be able to itemize deductions.
- Calculate T’s capital account in the partnership at the end of the tax year.
