Mark is a cash basis taxpayer.He is a partner in the M&M partnership,and his share of the partnership's profits for 2010 is $70,000.Only $30,000 was distributed to him in January 2010,and this was his share of the 2009 partnership profits.None of the 2010 profits were distributed because the partnership needed the cash for operations.Mark's gross income from the partnership for 2010 is $70,000.

Question

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Under the cash basis accounting method, income is recognized when it is received. However, for tax purposes, partners must report their share of the partnership's income, regardless of whether it is distributed. Therefore, Mark must report the entire $70,000 as his gross income for 2010.

Mark Is a Cash Basis Taxpayer