In the current year, the POD Partnership received revenues of $200,000 and paid the following amounts: $50,000 in rent and utilities, and $20,000 as a distribution to partner Olivia. In addition, the partnership earned $6,000 of long- term capital gains during the year. Partner Donald owns a 50% interest in the partnership. How much income must Donald report for the tax year?

Question

Quizplus · Accepted Answer

The partnership's ordinary income is calculated as follows: 
Revenues - Expenses - Distribution to partners 
$200,000 - $50,000 - $20,000 = $130,000 
Donald's share of ordinary income is 50% x $130,000 = $65,000

In addition, Donald must report his share of the long-term capital gains, which is $6,000 x 50% = $3,000.

Therefore, Donald must report a total income of $75,000 ($65,000 ordinary income + $3,000 long-term capital gains).

In the Current Year, the POD Partnership Received Revenues of $200,000