The Keisha Partnership has determined that business income for the 2020 taxation year was $130,000. Ms. Kerry holds a 50% interest in the partnership. Her drawings from the partnership during 2020 totalled $45,000. In addition, Ms. Kerry has made the following business related expenditures from her own funds outside the partnership: meals and entertainment costs of $5,000; business related automobile costs of $3,500; charitable donations of $3,000. How much business income will Ms. Kerry report on her 2020 tax return?

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Ms. Kerry's share of business income is calculated as 50% of the partnership's income, which is $65,000. However, she also made business related expenditures of $11,500 ($5,000 + $3,500 + $3,000). These expenditures can be deducted from her share of income, resulting in a net income of $53,500 ($65,000 - $11,500). Therefore, Ms. Kerry will report $59,000 ($53,500 + $5,500) of business income on her 2020 tax return.

The Keisha Partnership Has Determined That Business Income for the 2020