Mark is a cash basis taxpayer. He is a partner in the M&M partnership, and his share of the partnership's profits for 2017 is $90,000. Only $40,000 was distributed to him in January 2017, and this was his share of the 2016 partnership profits. None of the 2017 profits were distributed. Mark's gross income from the partnership for 2017 is $40,000.

Question

Quizplus · Accepted Answer

Mark is a cash basis taxpayer and therefore only includes income in the year it is actually received. He received $40,000 in January 2017, which was his share of the 2016 partnership profits. None of the 2017 profits were distributed to him, so he should not include them in his gross income for 2017. Therefore, his gross income from the partnership for 2017 is $0, not $40,000.

Mark Is a Cash Basis Taxpayer