A partnership is owned by a mother (60%) and her son (40%).Their capital accounts are maintained in the same ratio.The son received his ownership interest as a gift from his mother several years ago.Partnership income for the current year was $50,000.Although the mother performed services valued at $10,000, there was no entry on the partnership books and she received no cash for her services.To avoid a reallocation by the IRS, what amount of current year income should be allocated to the mother?

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The partnership income for the current year is $50,000. Since the capital accounts are maintained in a ratio of 60:40, the mother's share of the total income is 60% or $30,000. However, since she also performed services valued at $10,000, the total amount that should be allocated to her is $30,000 + $10,000 = $34,000. Allocating this amount to the mother's capital account would result in a total capital balance of $84,000 for the mother and $56,000 for the son, maintaining the 60:40 ratio.

A Partnership Is Owned by a Mother (60%) and Her