Kristie is a 30% partner in the KKM Partnership. During the current year, KKM reported gross receipts of $280,000 and a charitable contribution of $30,000. The partnership paid office expenses of $80,000. In addition, KKM distributed $20,000 each to partners Kaylyn and Megan, and the partnership paid partner Kaylyn $20,000 for administrative services. Kristie reports the following income from KKM during the current tax year:

Question

Quizplus · Accepted Answer

Kristie's share of the partnership's ordinary income is 30% of the net income after expenses: ($280,000 - $80,000) * 30% = $60,000. However, the $20,000 paid to Kaylyn for services is a deductible expense, reducing the net income to $180,000, so Kristie's share is $54,000. Her share of the charitable contribution is 30% of $30,000, which is $9,000.

Kristie Is a 30% Partner in the KKM Partnership