Rhonda has a 30% interest in the capital and profits of the ABC Partnership.Her share of the profits for 2010 was $60,000.She withdrew $40,000 from the partnership in 2010.In January 2011,after her share of the profits for 2010 had been computed,she withdrew her remaining $20,000 share of 2010 profits.As a result,Rhonda must recognize $40,000 of gross income in 2010 and $20,000 in 2011.

Question

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Rhonda must recognize the entire $60,000 of her share of the profits as gross income in 2010, regardless of when she withdrew the funds.

Rhonda Has a 30% Interest in the Capital and Profits