Wayne owns a 30% interest in the capital and profits of Emerald Company (a calendar year partnership). For tax year 2018, the partnership earned revenue of $900,000 and had operating expenses of $660,000. During the year, Wayne withdrew from the partnership a total of $90,000. He also invested an additional $30,000 in the partnership. For 2018, Wayne's gross income from the partnership is:
A) $72,000.
B) $90,000.
C) $132,000.
D) $162,000.

Question

Quizplus · Accepted Answer

Wayne's gross income from the partnership is based on his share of the partnership's net income, not on his withdrawals or additional investments. The partnership's net income is $240,000 ($900,000 revenue - $660,000 expenses). Wayne's 30% share of this net income is $72,000 (30% of $240,000).

Wayne Owns a 30% Interest in the Capital and Profits