On December 31 of last year, Donnie gave his son, Jimmy, a gift of a 30% interest in a partnership in which capital is a material income-producing factor.For the current calendar year, the partnership's ordinary income was $150,000.Donnie and Jimmy were the only partners in the current year.There were no guaranteed payments to partners.Donnie's services performed for the partnership were worth a reasonable compensation of $50,000 for the current year.Jimmy has never performed any services for the partnership.What is Jimmy's distributive share of partnership income for the current year?

Question

Quizplus · Accepted Answer

Jimmy's distributive share of partnership income is 30% of the $150,000 ordinary income, which is $45,000. However, since Donnie's services are worth $50,000, this amount is considered his reasonable compensation, leaving $100,000 to be split according to their partnership interests. Jimmy's share is 30% of $100,000, which is $30,000.

On December 31 of Last Year, Donnie Gave His Son