ABC partnership has $500,000 in income before taxes. The partnership pays out all of its income to the partners. If individual income tax rates are 33% and the corporate tax rate is 30%, the effective tax rate of the partnership is 33%.

Question

Quizplus · Accepted Answer

Partnerships themselves are not subject to income tax. Instead, the income is passed through to the partners who then pay tax at their individual rates. Therefore, if the individual income tax rate is 33%, the effective tax rate on the income distributed by the partnership would indeed be 33%.

ABC Partnership Has $500,000 in Income Before Taxes