Final answer:
Joe's taxable income on his 2019 return from the partnership is $9,000, which is his half of the partnership's earnings from January to June 2019. Distributions do not affect taxable income unless they exceed his basis, which they do not in this scenario.
Step-by-step explanation:
The question involves calculating Joe's taxable income from a business partnership for his 2019 return. We know that Joe and Leonard are equal partners, and we have the amount of income the partnership earns each month from July 1, 2018, to June 30, 2019, as well as the distributions made to each partner.
From July 1 to December 31, 2018, the partnership earns $4,000 per month, and from January 1 to June 30, 2019, it earns $3,000 per month. Since Joe is an equal partner, he is allocated half of the income. However, we need to focus on the 2019 period for his return. Over the six months from January to June 2019, the total income is $3,000 x 6 = $18,000 for the partnership or $9,000 for Joe. Additionally, as a partner, Joe is distributed $1,000 per month, leading to distributions of $6,000 for the year 2019.
In partnerships, taxable income generally includes the partner's distributive share of the partnership's income, not the distributions themselves unless the distributions exceed the partner's basis in the partnership. Joe's share of partnership income for 2019 is $9,000 (since from January to June 2019, the partnership has earned $3,000 per month), which is reflected in his ownership interest. Therefore, Joe's taxable income on his 2019 return from the partnership would be $9,000. Hence, the correct answer is d. $9,000.