Roger,Ellen,Drew and Cindy are equal partners in a local pub.The pub reports the following items for the current year: Each partner receives a Schedule K-1 with one-fourth of the preceding items reported to him/her.How must each individual report these results on his/her Form 1040?

Question

Roger,Ellen,Drew and Cindy are equal partners in a local pub.The pub reports the following items for the current year:  Each partner receives a Schedule K-1 with one-fourth of the preceding items reported to him/her.How must each individual report these results on his/her Form 1040?

Quizplus · Accepted Answer

Since each partner is an equal partner, they will each report one-fourth of the items listed on the Schedule K-1 they receive. Therefore, each partner will report $192,500 (one-fourth of $770,000) on Schedule E. Additionally, since the partners are receiving income from a business, they may also have deductible expenses related to that business. These expenses should be reported on Schedule A, and each partner will be able to deduct one-fourth of the reported expenses, which is $40,000. Therefore, the correct answer is B.

Roger,Ellen,Drew and Cindy Are Equal Partners in a Local Pub