(TCOs 2 and 11) Tyler has a 30% interest in the XY partnership. In the current y
ID: 2500379 • Letter: #
Question
(TCOs 2 and 11) Tyler has a 30% interest in the XY partnership. In the current year, the partnership has sales of $2,000,000, cost of goods sold of $1,300,000, and $300,000 in operating expenses. Tyler withdrew $150,000 from the partnership during the year, but his partner did not withdraw anything. (Points : 5) Tyler must report $120,000 gross income from the partnership for the year. The partnership is taxable on $400,000 for the year, and Tyler must include $120,000 in gross income. Tyler must report $150,000 gross income from the partnership for the year. Tyler is not required to recognize any income from the partnership for the year. None of the above
Explanation / Answer
The profit generated by XY Partnership is as under,
Profit = Sale - Cost of Goods sold - Operating exp
Hence Profit = $20,00,000 - $13,00,000 - $3,00,000 = $4,00,000
The partnership is taxable on $4,00,000 for the year being a independent entity.
Tyler must report the profit share of $120000 (30% of $400000) as a gross income from partnership which is tax free as the partnership has already paid a tax on the said portion.
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