Mark is a cash basis taxpayer. He is a partner in the M&M partnership, and his share of the partnership's profits for 2012 is $90,000.Only $40,000 was distributed to him in January 2012, and this was his share of the 2011 partnership profits. None of the 2012 profits were distributed although Mark's share of the 2012 profits was $90,000.Mark's gross income from the partnership for 2012 is $40,000.

Question

Quizplus · Accepted Answer

For a cash basis taxpayer, income is recognized when it is actually received. Mark received $40,000 in 2012, which was his share of the 2011 profits, so his gross income for 2012 is $40,000, not the $90,000 from 2012 profits that were not distributed.

Mark Is a Cash Basis Taxpayer