Lloyd and Harry, equal partners, form the Ant World Partnership. During the year

Question

Lloyd and Harry, equal partners, form the Ant World Partnership. During the year, Ant World had the following revenue, expenses, gains, losses, and distributions:

Given these items, what amount of ordinary business income (loss) and what total amount of separately-stated items should be allocated to each partner for the year? Enter any negative numbers with a minus sign (for example, enter -10000 for an amount of (10,000)

ORDINARY BUSINESS INCOME (LOSS):

Allocated to Lloyd?

Allocated to Harry?

TOTAL AMOUNT OF SEPARATELY STATED ITEMS:

Total amount allocated to Lloyd?

Total amount allocated to Harry?

Cost of Goods Sold $ 85,000 Cash Distribution to Harry $ 15,000 Municipal Bond Interest Income $ 1,500 Short-Term Capital Gains $ 4,500 Employee Wages $ 40,000 Rent Expense $ 10,000 Charitable Contributions $ 25,000 Sales $ 175,000 Repairs and Maintenance Expense $ 5,000 Long-Term Capital Gains $ 12,000 Fines and Penalties $ 5,000 Guaranteed Payment to Lloyd $ 25,000

Explanation / Answer

Note: Fines and penalties are not considered as deductible, assuming that they were paid for violation of law. If that is considered as deductible, each partners' share woulb be $15,000.

Distribution to Harry is not considered in Ordinary items, as its not an expense. It is also not a gain for Harry, hence not incuded in the separate items. The distribution will reduce Harry's basis in the partnership

Ordinary Income /Expense items Sales          175,000 Cost of goods sold            85,000 Employee Wages            40,000 Rent expense            10,000 Repairs and Maintenance expense              5,000 Ordinary Income            35,000 Allocated to Lloyd            17,500 Allocated to Harry            17,500

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