Alex,Ellen and Nicolas are equal partners in a local restaurant.The restaurant reports the following items for the current year: $\begin{array}{lr}
\text { Business revenue } & \$ 770,000 \
\text { Business expenses } & 470,000 \
\text { Investment expenses } & 150,000
\end{array}$ Each partner receives a Schedule K-1 with one-third of the preceding items reported to him/her.How must each individual report these results on his/her Form 1040?
A)$100,000 income on Schedule E;$50,000 investment expense on Schedule A
B)$257,667 income on Schedule E;$50,000 investment expense on Schedule A
C)$300,000 income on Schedule E;$50,000 investment expense on Schedule A
D)$300,000 income on Schedule E;$150,000 investment expense on Schedule A

Question

Quizplus · Accepted Answer

The net business income is calculated by subtracting business expenses from business revenue: $770,000 - $470,000 = $300,000. This amount is then divided equally among the three partners, resulting in $100,000 income for each, reported on Schedule E. Investment expenses are also divided equally, with each partner bearing $50,000, which is typically reported on Schedule A.

Alex,Ellen and Nicolas Are Equal Partners in a Local Restaurant