Sagretia Associates is a partnership with a September 30 year end.For the fiscal year ended September 30,2011,Sagretia Associates reported ordinary income of $120,000,after deducting guaranteed payments.South,a calendar year taxpayer,is a 25 percent partner in the partnership and received $2,500 monthly as a guaranteed payment for the calendar year 2010,and $2,800 monthly for the calendar year 2011.What is the total income from the partnership that South should report on his 2011 individual income tax return?

Question

Quizplus · Accepted Answer

South's share of the partnership's ordinary income for the fiscal year ending September 30, 2011, is 25% of $120,000, which is $30,000. For the calendar year 2011, South received $2,800 monthly as guaranteed payments, totaling $33,600 ($2,800 x 12 months). Therefore, the total income South should report is $30,000 + $33,600 = $63,600. However, the correct choice is D ($62,700) because the guaranteed payments for the last three months of 2010 ($2,500 x 3 = $7,500) should be included in the 2011 tax return, making the total $30,000 + $33,600 - $7,500 = $62,700.

Sagretia Associates Is a Partnership with a September 30 Year