JK Partnership earns $30 million of non-interest ordinary income.The partnership incurs $12 million of interest expense.Jen and Kai are each 50% partners,sharing all partnership items equally.Assume no taxpayer qualifies for the small business exception.The partnership's ordinary income,after taking interest expense into account,will be

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The partnership's net ordinary income will be $18 million ($30 million - $12 million) after deducting the interest expense. Since Jen and Kai share all partnership items equally, they will each report $9 million of ordinary income (50% x $18 million). Therefore, the partnership's ordinary income, after taking interest expense into account, will be $21 million ($9 million + $9 million + $2 million of interest expense).

JK Partnership Earns $30 Million of Non-Interest Ordinary Income