Ariel, Bob, Candice and Dmitri are equal partners in a local ski resort. The resort reports the following items for the current year: Each partner receives a Schedule K-1 with one-fourth of the preceding items reported to him/her. How must each individual report these results on his/her Form 1040?

Question

Ariel, Bob, Candice and Dmitri are equal partners in a local ski resort. The resort reports the following items for the current year:  Each partner receives a Schedule K-1 with one-fourth of the preceding items reported to him/her. How must each individual report these results on his/her Form 1040?

Quizplus · Accepted Answer

Each partner receives one-fourth of the amounts reported, so they each report 25% of each item. Adding up the results for each partner, we get: $450,000 gross income, $40,000 long-term capital gain, $4,000 short-term capital gain, and $80,000 Section 179 expense deduction. The long-term and short-term capital gains are combined for a total of $41,000, which is reported on Schedule D. The remaining items are reported on Schedule E. Therefore, the correct choice is B, which is the only one with the correct income and capital gain amounts.

Ariel, Bob, Candice and Dmitri Are Equal Partners in a Local