Sandy and Dave formed a law partnership, agreeing to split the income 50:50.The partnership had net income of $100,000.Dave withdrew $35,000 throughout the year, and Sandy withdrew $30,000.Dave and Sandy had no other income.Because of the partnership activities, Sandy's A.G.I, increased by
A)$100,000
B)$80,000
C)$50,000
D)$30,000

Question

Quizplus · Accepted Answer

The partnership net income was $100,000 and Sandy and Dave agreed to split it 50:50, so Sandy's share of the income was $50,000. However, Sandy withdrew $30,000 from the partnership during the year, so her taxable income from the partnership activities is $20,000 ($50,000 - $30,000). This $20,000 increase in income is included in Sandy's AGI. Therefore, Sandy's AGI increased by $20,000, not by the full partnership net income.

Sandy and Dave Formed a Law Partnership, Agreeing to Split