Kim received a 1/3 profits and capital interest in Bright Line, LLC in exchange for legal services she provided. In addition to her share of partnership profits or losses, she receives a $30,000 guaranteed payment each year for ongoing services she provides to the LLC. For X4, Bright Line reported the following revenues and expenses: Sales - $150,000, Cost of Goods Sold - $90,000, Depreciation Expense - $45,000, Long-Term Capital Gains - $15,000, Qualified Dividends - $6,000, and Municipal Bond Interest - $3,000. How much ordinary business income (loss) will Bright Line allocate to Kim on her Schedule K-1 for X4?
A) ($15,000)
B) $6,000
C) $9,000
D) $15,000
E) None of these will be reported as ordinary business income (loss) on Schedule K-1.

Question

Quizplus · Accepted Answer

Bright Line, LLC will report an ordinary loss of $15,000 on page 1 of Form 1065 ($150,000 - $90,000 - $45,000 - $30,000). However, 1/3 of this amount or ($5,000) must be allocated to Kim on her Schedule K-1.

Kim Received a 1/3 Profits and Capital Interest in Bright