On January 2 of the current year, Calloway and Taylor contribute cash equally to form the CT Partnership. Calloway and Taylor share profits and losses in a ratio of 75% and 25%, respectively. The partnership's ordinary income for the year was $40,000. Calloway received a distribution of $5,000 during the year. What is Calloway's share of taxable income for the year?
A)$5,000
B)$10,000
C)$20,000
D)$30,000

Question

Quizplus · Accepted Answer

Calloway's share of taxable income is calculated based on the profit-sharing ratio, not the distribution amount. With a profit of $40,000 and a sharing ratio of 75% for Calloway, his share of taxable income is 75% of $40,000, which equals $30,000.

On January 2 of the Current Year, Calloway and Taylor