Question

Matt and Joel are equal partners in the MJ Partnership. For the current year ended December​ 31, the partnership has book income of​ $80,000, which includes the following​ deductions: (1) guaranteed payments​ (salaries) to​ partners: Matt,​ $35,000; and​ Joel, $25,000; and​ (2) charitable​ contributions, $6,000. The book income amount does not include any sales of capital assets or Sec. 1231 assets or any taxminusexempt income. Based on the above​ information, what amount should be reported as ordinary income on the partnership​ return?

Answer 1

$86,000

Step-by-step explanation:

A partnership is a pass through entity that is not taxed directly, but instead its partners are taxed. Even the partners' salaries are recorded as drawings, not salary expense.

The partnership's total ordinary income = book income + any donations or contributions to charities = $80,000 + $6,000 = $86,000