In the current year, the POD Partnership received revenues of $200,000 and paid the following amounts: $50,000 in rent and utilities, and $20,000 as a distribution to partner Olivia.In addition, the partnership earned $6,000 of long-term capital gains during the year.Partner Donald owns a 50% interest in the partnership. How much income must Donald report for the tax year?
A)$68,000 ordinary income.
B)$78,000 ordinary income.
C)$65,000 ordinary income; $3,000 of long-term capital gains.
D)$75,000 ordinary income; $3,000 of long-term capital gains.
E)None of the above.

Question

Quizplus · Accepted Answer

- The partnership had revenues of $200,000, and paid $50,000 for rent and utilities, leaving $150,000 of ordinary income.
- Of this ordinary income, $20,000 was distributed to partner Olivia, leaving $130,000 to be split between the partners.
- The partnership also earned $6,000 of long-term capital gains during the year.
- Since Donald owns a 50% interest in the partnership, he is allocated 50% of the ordinary income ($65,000) and 50% of the long-term capital gains ($3,000).
- Therefore, Donald must report $75,000 of ordinary income and $3,000 of long-term capital gains for the tax year.

In the Current Year, the POD Partnership Received Revenues of $200,000