Thomas and Miles are equal partners in a partnership, which uses the calendar year as its tax year. On September 1, this year, Katie contributed $60,000 cash for a one-third interest in the partnership. The partnership reports a $24,000 ordinary loss for the tax year ending on December 31 of this year. The loss allocation to Katie (new partner)is
A)$0.
B)$2,667.
C)$4,000.
D)$8,000.

Question

Quizplus · Accepted Answer

Katie joined the partnership on September 1, so she is only responsible for her share of the loss from that date forward. The partnership's loss for the year is $24,000, and Katie's share is one-third. However, since she was only a partner for 4 months (September to December), her share of the loss is prorated: ($24,000 * 1/3) * (4/12) = $2,667.

Thomas and Miles Are Equal Partners in a Partnership, Which