Sophia owns 20% of a partnership that reported net income of $130,000 for the year. During the year $18,000 was distributed to Sophia from the partnership. How much should Sophia include in her taxable income for the year?
A) $44,000
B) $29,000.
C) $26,000
D) $44,000.

Question

Quizplus · Accepted Answer

Sophia's share of the net income is calculated as:
20% x $130,000 = $26,000

The $18,000 distribution reduces Sophia's ending capital balance in the partnership, but does not affect her taxable income for the year. Therefore, Sophia should include only her share of the net income in her taxable income, which is $26,000.

Sophia Owns 20% of a Partnership That Reported Net Income