Martin and Joe are equal partners in Ferrell Company. For the current year, Ferrell Company reports the following items of income and expense:
?
$$\begin{array} { l r }
\text { Sales revenues } & \$ 500,000 \
\text { Long-term capital gains } & 14,000 \
\text { Short-term capital losses } & ( 10,000 ) \
\text { Trade and business expenses } & ( 200,000 ) \
\text { Limited partnership loss } & ( 50,000 ) \
\text { Taxable income } & \$ 254,000
\end{array}$$
In addition to his Ferrell Company earnings, Martin has dividend income of $25,000 and a $10,000 loss from the sale of land held as an investment for 3 years. Martin's adjusted gross income is:
A)$162,000
B)$167,000
C)$172,000
D)$187,000
E)$192,000

Question

Martin and Joe are equal partners in Ferrell Company. For the current year, Ferrell Company reports the following items of income and expense:
?
$$\begin{array} { l r } 
\text { Sales revenues } & \$ 500,000 \
\text { Long-term capital gains } & 14,000 \
\text { Short-term capital losses } & ( 10,000 ) \
\text { Trade and business expenses } & ( 200,000 ) \
\text { Limited partnership loss } & ( 50,000 ) \
\text { Taxable income } & \$ 254,000
\end{array}$$
In addition to his Ferrell Company earnings, Martin has dividend income of $25,000 and a $10,000 loss from the sale of land held as an investment for 3 years. Martin's adjusted gross income is:
A)$162,000
B)$167,000
C)$172,000
D)$187,000
E)$192,000

Quizplus · Accepted Answer

Martin's share of Ferrell Company's ordinary income is $100,000 ($200,000 * 50%). He also has dividend income of $25,000, making his total income $125,000. However, he has a $10,000 loss from the sale of land, which can be used to offset some of his income. Therefore, Martin's adjusted gross income is $115,000 ($125,000 - $10,000). Adding Joe's share of Ferrell Company's income of $100,000, the total income of Ferrell Company for the year is $200,000. Therefore, Martin's share of the company's income is $100,000. Adding this to his other income, Martin's total income is $215,000. However, due to the $10,000 loss, his adjusted gross income is $205,000 ($215,000 - $10,000).

Martin and Joe Are Equal Partners in Ferrell Company In Addition to His Ferrell Company Earnings, Martin Has Dividend