In the current year,the POD Partnership received revenues of $100,000 and paid the following amounts: $20,000 in rent and utilities,and $10,000 as a distribution to partner Olivia.In addition,the partnership earned $4,000 of qualifying dividend income during the year.Partner Don owns a 50% interest in the partnership.How much income must Don report for the tax year?
A)$42,000 ordinary income.
B)$37,000 ordinary income.
C)$40,000 ordinary income;$2,000 of qualifying dividends.
D)$35,000 ordinary income;$2,000 of qualifying dividends.
E)None of the above.

Question

Quizplus · Accepted Answer

First, we calculate the partnership's ordinary income:
Revenues - Rent and Utilities - Olivia's distribution = $100,000 - $20,000 - $10,000 = $70,000 ordinary income.
Don's share of partnership income is 50% of $70,000 = $35,000.
In addition, the partnership earned $4,000 of qualifying dividend income, so Don's share of that is also 50% of $4,000 = $2,000.
Therefore, Don must report $40,000 of ordinary income ($35,000 from the partnership and $5,000 of the qualifying dividends that he received) and $2,000 of qualifying dividends on his personal tax return.

In the Current Year,the POD Partnership Received Revenues of $100,000