Question

Andrew received a Schedule K-1 from Zeta Partnership reflecting $40,000 share of ordinary income, $65,000 guaranteed payment, and $20,000 cash distribution. As a result of his ownership of Zeta, Andrew's taxable income will increase by what amount

Answer 1

Its $105,000 because I took this before

Answer 2

Answer: $105,000

Explanation: Andrew's taxable income will increase by $105,000.

The ordinary income of $40,000, guaranteed payment of $65,000, and cash distribution of $20,000 are all taxable to Andrew as a partner in the partnership. Therefore, the total amount of taxable income is $40,000 + $65,000 + $20,000 = $125,000.

Therefore, the correct choice is:

$105,000.