Question

This year, FGH Partnership generated $730,000 ordinary business income. FGH has two equal partners: Triad LLC and Beta, an S corporation. Triad LLC has three members: Mr. Ty, who owns a 45 percent interest; Mrs. Ude, who owns a 35 percent interest; and V Inc., which owns a 20 percent interest. Beta has 100 shares of outstanding stock, all of which are owned by Ms. Byrd.

Required:
Identify the taxpayers who must pay tax on the partnership income and determine how much income must be reported by each.

Answer 1

Mr. Ty - $164,250

Mrs. Ude - $127,750

V Inc. - $73,000

Ms. Byrd - $365,000

Step-by-step explanation:

Since both, companies are equal partners. Therefore, the generated income of $730,000 will be divided between them equally i.e. $365,000 each.

Now this income will be divided amongst the company's members based on their percentage of interest in the company. This is done as follows:

Mr. Ty

= $365,000 * 45%

= $164,250

Mrs. Ude

= $365,000 * 35%

= $127,750

V inc.

= $365,000 * 20%

= $73,000

The corporation Beta has only one member Ms. Byrd. Therefore, all the income of Beta is 100% owned by Ms. Byrd at $365,000.

Both the companies (Triad LLC and Beta) will show their income as if it were reported by their respective members as follows:

Mr. Ty - $164,250

Mrs. Ude - $127,750

V Inc. - $73,000

Ms. Byrd - $365,000