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34. Ruben and Albert are both calendar-year taxpayers, and are equal partners in the RA Partnership,...

34. Ruben and Albert are both calendar-year taxpayers, and are equal partners in the RA Partnership, which has a fiscal year ending on October 31. During the 2018-2019 fiscal year the partnership earns $15,000 each month, and during the 2019-2020 fiscal year the partnership earns $20,000 each month. The partnership distributes $30,000 cash to Ruben in January 2019 and $40,000 cash to Albert in December 2019. How much income will each partner have to recognize from the partnership for 2019?
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Answer #1

Solution:

Since Ruben and Albert are Calendar year tax payers, They have to report income from January 2019 to Dec 2019.

Income to be recognized by each partner would be 50% share in the partnership firm, because they are equal partners.

and hence,

Income to be recognized by each partner:

Income from January 2019 to October 2019 = $75,000

($15,000 per month X 10 months X 50% share)

Add: Income from November 2019 to December = $20,000

($ 20,000 per month X 2 months X 50% share)

Total income for 2019 Tax year of each partner = $95000

Therefore, Ruben and Albert will have to recognize $ 95000 each as their income for Tax year 2019.

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