Rich is a partner in RKW partnership.Rich owned 50% from January 1,2016 to April 30,2016,when he bought Kevin's 25% interest.He owned 75% for the rest of the year assume a 365-day year).The partnership had ordinary income of $150,000 and $25,000 in long-term capital gains.Barring any special allocations in a partnership agreement,Rich's share of the income items is:

Question

Quizplus · Accepted Answer

To calculate Rich's share of ordinary income and capital gains, we need to break down the year into two parts:

January 1, 2016, to April 30, 2016: Rich owned 50% of the partnership, so his share of the income items for this period is:

$150,000 ordinary income x 50% = $75,000 ordinary income
$25,000 long-term capital gains x 50% = $12,500 capital gain

May 1, 2016, to December 31, 2016: Rich owned 75% of the partnership, so his share of the income items for this period is:

$150,000 ordinary income x 75% = $112,500 ordinary income
$25,000 long-term capital gains x 75% = $18,750 capital gain

Adding up the two periods, we get:

$75,000 + $112,500 = $187,500 ordinary income
$12,500 + $18,750 = $31,250 capital gain

However, this assumes that there were no special allocations in the partnership agreement. If there were, the allocations could affect Rich's share of the income items.

Rich Is a Partner in RKW Partnership