y Louis: Attempt 1 Question 18 (5 points) José, a cash method taxpayer, is a par
ID: 2339684 • Letter: Y
Question
y Louis: Attempt 1 Question 18 (5 points) José, a cash method taxpayer, is a partner in J&T Accounting Services, a calendar year partnership. Under the partnership agreement, José is to receive 20% of the partnership's profits or losses. Each partner is allowed to withdraw $10,000 each month for his or her living expenses. José withdrew $120,000 during the year as his monthly draw in 2018. However, in December the partnership was short on cash and José was required to invest an additional $10,000 in the partnership. In March 2018, José received $40,000 as his share of distributed 2017 profits. The partnership earnings before partners' withdrawals for 2018 totaled $1 million. Compute José's gross income from the partnership for 2018.Explanation / Answer
Jose's gross income from the partnership for 2018 = 20% (Jose's share in the partnership profit)* $ 1million of earnings for 2018
= $200,000
(Please note that amount of distribution received by Jose will not be included in his gross income. Withdarwal of profit will reduce his capital in the firm and his investment of $10,000 in the month of December will only increase his capital by that amount. All these will not affect his gross income).
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