Question

Please refer to the multiple-choice solution below. Choose one of the partners (Murray or Parker) and prepare a Schedule K-1 based on the information provided (please find it on Google on your own). You must include the name of the partnership, the name of the partner, the three items that must be reported separately, and the ordinary income. If you are wondering, Section 1231 loss is similar to capital loss but has its own line (I cover that in ACCT 3101). [6] For the current year, the Murray and Parker Partnership had book income of $100,000, which included the following: Long-term capital gain $ 7,000 Sec. 1231 loss (3.000) Dividends 200 Interest paid to partners for use of capital 12,000 The partners share profits and losses equally. What amount of partnership income (excluding all partnership items which must be reported separately) should each partner report in his or her individual income tax return for the current year? A. $47,900 B. $48,000 C. $50,000 D. $53,900 The correct answer is A. A. A partnership's ordinary income is the portion of taxable income not required to be stated separately (Sec. 702(a)(8)]. The interest paid to partners is a guaranteed payment which results in an ordinary deduction, Book income may be adjusted to ordinary income by excluding all items of income and adding back all deduction and loss items, which must be separately stated. The partnership's ordinary income is Book income $100,000 Add back: Sec. 1231 loss 3,000 Subtract: Long-term capital gain (7,000) Dividends (200) Partnership ordinary income $ 95,800 Because the partners share profits and losses equally, each partner's share of partnership income is $47.900 ($95,800 x 50%). B. The dividends must be subtracted to arrive at partnership ordinary income. C. The book income must be adjusted to arrive at partnership ordinary income. D. The partnership ordinary income does not equal $100,800.

Answer 1

651119 D Amended K-1 Part II Partner's Share of Current Year Income, Deductions, Credits, and Other Items OMB No. 1545-0123 FInal K-1 Schedule K-1 2019 (Form 1065) Department of the Treasury Internal Revenue Service Ordnary business Income (loss) 15 Credits For calendar year 2019, or tax year 47,900 Net rental real estate Income (oss) 2019 beginning ending Partner's Share of Income, Deductions, Credits, etc. Other net rental Income (loss) 16 Foreign transactions See back of fom and separate Instructions. Part I Information About the Partnership Guaranteed payments for services Partnership's employer identiftication number Guaranteed payments for capital 4b Partnership's name, address, city, state, and ZIP code Total guaranteed payments 4c Murray and Parker Partnership Interest Income IRS Center where partnership filed retum Check If this is a publicly traded partnership (PTP) Part II Information About the Partner Ordinary dividends ва 200 6b Qualifled dividends Partner's SSN or TIN (Do not use TIN of a disregarded entity. See Inst.) Name, address, ctty, state, and ZIP code for partner entered in E. See Instructions. Dividend equlvalents Alternative minimum tax (AMT) hems вс 17 Royaltles Murray Net short-term capital galn (loss) General patner or LLC member-manager Limited partner or other LLC member H1 O Domestic partner Net long-term capital gain (loss) 7000 Collectibles (28%) gain (loss) Foreign partner it the partner is a disregarded entity (DE, enter the partner's: 9a 18 Tax-exempt iIncome and nondeductible expenses H2 O 9b TIN Name What type of entity Is this partner? 11 If this partner is a retirement plan (IRA/SEP/Keoghvetc.), check here L 9c Unrecaptured section 1250 galn 12 Partner's share of profit, loss, and capital (see Instructions): Ending Net section 1231 gain (loss) Beginning 10 (3000) 19 50 % 50 % Distributions Profit 50 % Other Income (loss) 11 Loss Capital Check If decrease Is due to sale or exchange of partnership Interest 20 Other Informatilon 12 Section 179 deduction к Partner's share of llablitles: Beginning Ending 13 Other deductions Nonrecourse Qualifled nonrecourse financing Recourse Check this box If tem K Includes llablity amounts from lower tler partnerships. Partner's Capital Account Analysis Self-employment eamings (loss) 14 Beginning capital account Capital contributed during the year. Current year net income (loss). 24 Other Increase (decrease) (attach explanation) $ 21 More than one activity for at-risk purposes More than one activity for passive activity purposes 22 Withdrawals & distributions "See attached statement for additional information. Ending capital account Did the partner contribute property with a bulit-in galn or loss? O Yes м O No If "Yes," attach statement. Se Instructions. Partner's Share of Net Unrecognized Section 704(C) Galn or (Loss) 47,900 Beginning Ending- Schedule K-1 (Form 1065) 2019 For Paperwork Reduction Act Notice, see Instructions for Form 1065. www.lrs.gow/Form1065 Cat. No. 11394R For IRS Use Only