Question

John Jones is married with two children. His family consists of his wife Jen Jones and his children James Jones and Jackie Jones. This case study is mainly surrounding John's earnings, but Jen also works and receives a salary of $80,000 which SHOULD be included in the overall taxable income calculation and included on Form 1040     

James Jones is 12 years old and lives at home. His parents fully provide for him                                                           

Jackie jones is a 23 year old full time student and lies at school.   She has a part time job and earns $4000 a year. Her parents provide for more than 50% of her support.                                                                              

For this project please use the 2018 tax forms and tax rates                                                                                                                                                                         

Please also use the 2019 IRC 179 expense rules and assume no Bonus Depreciation  

Partnership ABCD                                                                                                                                                                           

See below for Sales, expense and transaction information during the year.                                                                                                                                    

This is a services based business John started with his Friends. John owns 25%                                                                                                            

John spends 300 hours a year on the business                                                                                                                                                                   

John receives a guaranteed payment of $10,000 for his services. He is the only partner that gets a GP.                                                                        

Ignore the 199A deduction                                                                                                                                                                         

Income and deduction items                                                                                                                                                                      

                Revenue              $80,000                                                                                                                                                              

                guaranteed payment      $10,000                                                                                                                                                              

                Meals and Entertainment expense           $10,000                                                                                                                                                              

                interest income $2,000                                                                                                                                                 Requirements                                                                                                                                                                  

1              Calculate the Taxable Income of the partnership, and John's portion of the Taxable income                                                                                    

2              Complete John's Schedule K-1 to use for his individual return                                                      

Answer 1

Revenue $80,000

guaranteed payment      $10,000

interest income $2,000

Total Income $92000

Less Expenses

meals $10,000

salary 300*20 $6,000

Taxable income of partnership = $76,000

Johns share 25% = 19,000