Question

Joe's Chairs, Limited, operates as a partnership and files form 1065. Joe's manufactures lounge chairs. During the current tax year ended December 31st, Joe's generated income and expenses as: Employee wages $15,000. Income from rental real estate $20,000. Charitable contributions $500. Cost of goods sold $10,000. Income from chair sales $75,000. What is Joe's ordinary income (loss) from business activities that Joe's must report on Schedule K, for the current year?

Answer 1

Joe's ordinary income (loss) from business activities that Joe's must report on Schedule K, for the current year is $69,500.

Step-by-step explanation:

Joe's ordinary income (loss) from business activities that Joe's must report on Schedule K, for the current year can be calculated by adding the income and subtracting the expenses.

Income from chair sales: $75,000
Income from rental real estate: $20,000
Total income: $95,000

Expenses:
Employee wages: $15,000
Charitable contributions: $500
Cost of goods sold: $10,000
Total expenses: $25,500

To calculate the ordinary income, subtract the total expenses from the total income:
Ordinary income = Total income - Total expenses
Ordinary income = $95,000 - $25,500
Ordinary income = $69,500

Therefore, Joe's must report an ordinary income of $69,500 on Schedule K for the current year.