Big Red Company is a partnership, owned 75% by Julie (basis in partnership of $7
ID: 2450650 • Letter: B
Question
Big Red Company is a partnership, owned 75% by Julie (basis in partnership of $75,000) and 25% by Mike (basis in partnership of $25,000). For the current year, Big Red’s activities consist of the following items:
Gross Revenue -$1,000,000
Dividends Received (from 10% owned corp)- 100,000
LTCG- 25,000
STCL- 10,000
Cost of Goods Sold- 430,000
Guaranteed payments ($75,000 to Julie and $75,000 to Mike)
Admin Expense- 200,000
Charitable Contributions- 50,000
Distribitions to Partners ($75,000 to Julie and $25,000 to Mike)
A) Compute Big Red's total partnership ordinary income
B) Specifically identify Big Red's seperately stated items
C) How much of Julie's income from Big Red will be subject to SE tax?
Explanation / Answer
Ans-
A) Big Red's total partnership ordinary income
Gross Revenue - $1,000,000
Less-Cost of goods sold $430,000
Gross profit $570000
Less-
Admin Expense ($200,000)
Charitable Contributions ($50,000)
Distribitions to Partners ($100000)
Odinary Income $ 220000
B) Big Red's total income
Income from Business $220000
Disvidend received $100000
LTCG $20000
STCL ($10000)
Total income $330000
C) Total Julie's income from Big Red will be subject to SE tax
Amount received as salary $75000
Share of proft (75%330000) $247500
Total $322500
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.