Question

Burgundy, Inc., and Violet are equal partners in the calendar year BV LLC.

Burgundy uses a fiscal year ending April 30, and Violet uses a clean year.
Burgundy receives an annual guaranteed payment of $100,000 for use of capital contributed by Burgundy.
BV's taxable income (after deducting the payment to Burgundy, Inc.) is $80,000 for 2016 and $90,000 for 2017.
1. What is the amount of income from the LLC that Burgundy must report for its tax year ending April 30, 2017?
2. What is the amount of income from the LLC that Violet must report for her tax year ending December 31, 2017?

Answer 1

Answer: a. $141667

b. $45000

Step-by-step explanation:

1. What is the amount of income from the LLC that Burgundy must report for its tax year ending April 30, 2017?

Guaranteed payments = $100,000

Share of 2016 income = ($80000 × 50% × 8/12) = $80000 × 0.5 × 0.67 = $26667

Share of 2017 income = ($90000 × 50% × 4/12) = $15000

Income = $100000 + $26667 + $15000

= $141,667

2. What is the amount of income from the LLC that Violet must report for her tax year ending December 31, 2017.

This will be the share of 2017 income which will be:

= 50% × $90000

= 0.5 × $90000

= $45000