Question

Rich is a partner in RKW partnership. Rich owned 50% from January 1, 2013 to April 30, 2013, when he bought Kevin's 25% interest. He owned 75% for the rest of the year (assume a 365-day year). The partnership had ordinary income of $150,000 $25,000 in long-term capital gains. Barring any special allocations in a partnership agreement, Rich's share of the income items is:

Answer 1

Computation of Rich's share of income items:

No of days of ownership from :

Jan 1 to April 30 = 31+28+31+30 = 120 days

Ownership % = 120/365 * 50% = 16.44%

May 1 to Dec 31 = 365 - 120 = 245 days

Ownership % = 245/365 * 75% = 50.34%

Total ownership for the year = 16.44% + 50.34% = 66.78 %

Rich's share of income items:

Rich's share in ordinary income = $150,000 * 66.78% = $100,170

Rich,s share in Long term capital gains = $25,000 * 66.78% = $16,695