Question

In 2023, a person earned employment income of $80,000 they owned a 75% interest in a partnership that incurred a $50,000 business loss, and a 100% interest in a corporation that incurred a $20,000 business loss for its year ended june 30, 2023. what would be the individual's 2023 net income?

a. $32,500
b. $42,500
c. $25,000
d. $35,000

Answer 1

After calculating the proportional losses from the business endeavours, an individual with an employment income of $80,000, a 75% stake in a partnership with a $50,000 loss, and a 100% stake in a corporation with a $20,000 loss, would have a net income of $22,500 for the year 2023.

Step-by-step explanation:

To calculate an individual's net income for 2023 when they have various sources of income and losses, you would start with the employment income and then subtract the proportional losses from the partnerships and corporations they have interest in.

First, the employment income is $80,000. From this, we subtract the individual's share of the partnership loss, which is 75% of $50,000. This results in a $37,500 loss (0.75 x $50,000). Additionally, since they own 100% of the corporation, we would subtract the full $20,000 loss of the corporation from their income.

Therefore, the individual's net income would be calculated as: $80,000 (employment income) - $37,500 (partnership loss) - $20,000 (corporation loss) = $22,500 which is not listed in the options provided.