ABC Co. and XYZ Co. have entered into a 50/50 partnership for business purposes. Both companies are CCPCs and they share the profits and losses of the business
Equally. During the year, the partnership earned $200,000 of active business income, and ABC Co. earned $450,000 in business income from operations other than the
Partnership. All of the companies have a December 31st year-end. How much of ABC Co.'s share of the partnership profits will be eligible for the small business deduction?
A) $50,000
B) $100,000
C) $0
D) $200,000

Question

Quizplus · Accepted Answer

ABC Co.'s share of the partnership profits is $100,000 (50% of $200,000). Since ABC Co. also earned $450,000 in business income from operations other than the partnership, its total business income is $550,000. The small business deduction is available for active business income up to $500,000. Therefore, ABC Co.'s share of the partnership profits that is eligible for the small business deduction is $50,000.

ABC Co and XYZ Co