Question

Molly is a 30% partner in the MAP Partnership. During the current tax year, the partnership reported ordinary income of $200,000 before any permitted deduction for guaranteed payments and distributions to partners. The partnership made an ordinary cash distribution of $20,000 to Molly and made guaranteed payments to partners Molly, Amber, and Pat of $20,000 each ($60,000 total guaranteed payments). How much will Molly's adjusted gross income increase as a result of these items

Answer 1

$62,000

Step-by-step explanation:

The partnership had a total ordinary income of $200,000. Then guaranteed payments were made to its three partners Molly, Amber and Pat of $20,000 each $20,000 x 3 = $60,000.

$200,000 - 60000

= $140,000

So the partnership adjusted income is reduced to $140,000, out of that amount, 30% belongs to Molly.

30/100 × 140,000

= $42,000

Molly's share of the partnership adjusted income is $42,000.

Molly's total earnings from the partnership are $62,000

= $20,000 + $42,000

= $62,000