Wayne owns a 25% interest in the capital and profits of Emerald Company (a calendar year partnership).For tax year 2012, the partnership earned revenue of $900,000 and had operating expenses of $560,000.During the year, Wayne withdrew from the partnership a total of $90,000. He also invested an additional $20,000 in the partnership.For 2012, Wayne's gross income from the partnership is:
A)$70,000.
B)$85,000.
C)$90,000.
D)$110,000.
E)None of the above.

Question

Quizplus · Accepted Answer

To calculate Wayne's gross income from the partnership, we first need to determine the partnership's net income: 
$900,000 (revenue) - $560,000 (expenses) = $340,000 (net income)
Since Wayne has a 25% interest in the partnership, his share of the net income is:
$340,000 (net income) x 0.25 (Wayne's interest) = $85,000
Next, we need to add in Wayne's withdrawals and additional investment:
$85,000 (net income) + $20,000 (additional investment) - $90,000 (withdrawals) = $15,000
Therefore, Wayne's gross income from the partnership for 2012 is $15,000.

Wayne Owns a 25% Interest in the Capital and Profits