Jack owns a 50% interest in the Westhaven Partnership. Jack receives a distribution of $100,000 from Westhaven and is provided with medical insurance and a $50,000 group-term life insurance policy that costs the company $4,000. Westhaven's taxable income before considering the payments to and on behalf of Jack is $180,000. How much income does Jack have from Westhaven?

Question

Quizplus · Accepted Answer

Jack's distribution of $100,000 is taxable to him, as he owns a 50% interest in the partnership. Thus, he has $50,000 of taxable income from the distribution.

In addition, the cost of the group-term life insurance policy provided by the company is also taxable to Jack as income. The amount of taxable income is calculated as  $50,000 * ($4,000 / 2 * $180,000) = $2,222.

Therefore, Jack's total income from Westhaven is $50,000 + $2,222 = $52,222. However, only option C ($92,000) is close to that value.

Jack Owns a 50% Interest in the Westhaven Partnership