Latoya owns a 10% interest in the ABC Partnership from January 1 through June 30 (the 181st day of the tax year)of the current year (a non-leap year). On July 1, Latoya buys an additional 10% interest in the partnership. The XYZ Partnership's ordinary income is $109,500 and it is earned evenly throughout the year. Latoya's distributive share of the ordinary income is
A)$16,380.
B)$16,425.
C)$16,470.
D)$21,900.

Question

Quizplus · Accepted Answer

Latoya owns a 10% interest in the partnership for the first 6 months and then acquires an additional 10% interest for the remaining 6 months of the tax year. Therefore, her weighted average ownership percentage for the entire year is 10% + ((10% * 6/12) = 15%.

Her distributive share of the partnership's ordinary income is therefore:

Distributive Share = Weighted Average Ownership Percentage * Partnership Ordinary Income
Distributive Share = 0.15 * $109,500
Distributive Share = $16,425

Therefore, the answer is choice C.

Latoya Owns a 10% Interest in the ABC Partnership from January