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 yearend. 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, 2013 and 2014. The partnership paid guaranteed payments to Stephanie of $2,000 and $3,000 per month during the fiscal years ended September 30, 2013 and 2014. How much will Stephanie's adjusted gross income be increased by these partnership items for her tax year ended December 31, 2013?

Question

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 year­end. 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, 2013 and 2014. The partnership paid guaranteed payments to Stephanie of $2,000 and $3,000 per month during the fiscal years ended September 30, 2013 and 2014. How much will Stephanie's adjusted gross income be increased by these partnership items for her tax year ended December 31, 2013?

Quizplus · Accepted Answer

Since Stephanie is a cash basis taxpayer, she only includes partnership income and guaranteed payments in her gross income in the year she receives them. For the fiscal year ending September 30, 2013, Stephanie received guaranteed payments of $2,000 per month, or $24,000 for the year. She also received her share of operating income, which was $10,000 per month, or $60,000 for the year ($120,000 x 50%). Therefore, Stephanie's total gross income from the partnership for 2013 was $84,000 ($24,000 in guaranteed payments + $60,000 in operating income).

Stephanie Is a Calendar Year Cash Basis Taxpayer