Meg and Abby are equal partners in the AM Partnership, which earns $40,000 ordinary income, $6,000 long-term capital gain (LTCG), and $2,000 Sec. 1231 loss during the current year. What is the amount and character of income that must be reported on Abby's tax return for this year's partnership operations?
A)$20,000 ordinary income, $3,000 LTCG, $1,000 Sec. 1231 loss
B)$19,000 ordinary income, $3,000 LTCG
C)$23,000 ordinary income, $1,000 Sec. 1231 loss
D)$22,000 ordinary income

Question

Quizplus · Accepted Answer

Since Meg and Abby are equal partners, they each report half of the partnership's income and losses. The partnership's ordinary income of $40,000 is divided equally, so each reports $20,000. The LTCG of $6,000 is also divided equally, so each reports $3,000. The Sec. 1231 loss of $2,000 is similarly divided, with each reporting a $1,000 loss.

Meg and Abby Are Equal Partners in the AM Partnership