For the tax year, OPQ Partnership reported $42,000 net ordinary income, $5000 in

Question

For the tax year, OPQ Partnership reported $42,000 net ordinary income, $5000 interest income, $600 charitable contribution, and $18,000 section 179 deduction. Pat is a general partner who owns a 20 percent interest in 0PQ. She received a $12,000 guaranteed payment and $0 distributions during the year. What is the amount of Pat’s self-employment income from OPQ? (1) $4,680 (2) $4,800 (3) $8,400 (4) $16,800 For the tax year, OPQ Partnership reported $42,000 net ordinary income, $5000 interest income, $600 charitable contribution, and $18,000 section 179 deduction. Pat is a general partner who owns a 20 percent interest in 0PQ. She received a $12,000 guaranteed payment and $0 distributions during the year. What is the amount of Pat’s self-employment income from OPQ? (1) $4,680 (2) $4,800 (3) $8,400 (4) $16,800 (1) $4,680 (2) $4,800 (3) $8,400 (4) $16,800

Explanation / Answer

Net ordinary income of the partnership = $42,000

Section 179 deduction = $18,000

Therefore,

Partnership's income after section 179 deduction = $42,000 - $18,000 = $24,000

Pat owns a 20 percent interest in the partnership.

Therefore,

Pat's share in the partnership's income after section 179 deduction = $24,000 x 20% = $4,800

Also, Pat receives a guaranteed income of $12,000.

Thus,

Pat's total self employment income = $4,800 + $12,000 = $16,800

The correct answer is (4) $16,800

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