Question

April, a calendar year taxpayer, is a 40% partner in Pale Partnership, whose fiscal year ends on September 30th. For the fiscal year ending September 30, 2015, the partnership had $400,000 net income and for fiscal year ending September 30, 2016, the partnership had $300,000 net income. April withdrew $100,000 in December of each year. April's gross income from the partnership for 2015 is $160,000 ($400,000 × 40%). What is April's gross income from Pale Partnership for the fiscal year ending September 30, 2016?

A) $120,000
B) $150,000
C) $180,000
D) $200,000

Answer 1

April's gross income from Pale Partnership for the fiscal year ending September 30, 2016, is calculated as 40% of the partnership's net income of $300,000, resulting in $120,000.

Step-by-step explanation:

To determine April's gross income from Pale Partnership for the fiscal year ending September 30, 2016, we apply her partnership interest rate to the net income of the partnership. April is a 40% partner, and the partnership had a net income of $300,000 for the fiscal year ending September 30, 2016. Multiplying April's partnership rate (40%) by the net income ($300,000) gives us the amount of her share of the income.

April's gross income = 40% of $300,000 = $120,000.

Therefore, the correct answer is A) $120,000.