On December 31 of last year,Rachel gave her daughter,Courtney,a gift of a 25% interest in a partnership in which capital is a material income-producing factor.For the current calendar year,the partnership's ordinary income was $200,000.Rachel and Courtney were the only partners,and there were no guaranteed payments.Rachel's services performed for the partnership were worth $40,000,and Courtney has never performed any services.What is Courtney's distributive share of partnership income for the current year?

Question

Quizplus · Accepted Answer

Courtney's distributive share of partnership income is 25% of the $200,000 ordinary income, which is $50,000. However, since Rachel's services are valued at $40,000, this amount is subtracted from the total income before distribution. Thus, $200,000 - $40,000 = $160,000, and 25% of $160,000 is $40,000.

On December 31 of Last Year,Rachel Gave Her Daughter,Courtney,a Gift