Mark is a cash basis taxpayer. He is a partner in the M&M partnership, and his share of the partnership's profits for 2018 is $90,000. Only $40,000 was distributed to him in January 2018, and this was his share of the 2017 partnership profits. None of the 2018 profits were distributed. Mark's gross income from the partnership for 2018 is $40,000.

Question

Quizplus · Accepted Answer

As a cash basis taxpayer, Mark only recognizes income when it is received. Therefore, only the $40,000 that was distributed to him in January 2018, which was his share of the 2017 partnership profits, should be included in his gross income for 2018. The remaining $50,000 of his share of 2018 partnership profits will not be recognized until it is actually distributed to him.

Mark Is a Cash Basis Taxpayer