Stephanie is a calendar year cash basis taxpayer. She owns a 50% profit and loss interest in a cash basis partnership with a September 30 year-end. The partnership's operating income (after deducting guaranteed payments) was $120,000 ($10,000 per month) and $144,000 ($12,000 per month), respectively, for the partnership tax years ended September 30, 2011 and 2012. The partnership paid guaranteed payments to Stephanie of $2,000 and $3,000 per month during the fiscal years ended September 30, 2011 and 2012. How much will Stephanie's adjusted gross income be increased by these partnership items for her tax year ended December 31, 2011?
A) $60,000.
B) $72,000.
C) $84,000.
D) $90,000.
E) $108,000.

Question

Quizplus · Accepted Answer

Stephanie's adjusted gross income for 2011 will include her share of the partnership's income from October 1, 2010, to September 30, 2011, which is $60,000 (50% of $120,000), plus the guaranteed payments she received during that period, which total $24,000 ($2,000 per month for 12 months). Therefore, her AGI is increased by $84,000.

Stephanie Is a Calendar Year Cash Basis Taxpayer