Calculating Partnership Ordinary Income/Loss and Partner Taxable Income Partner Q is a partner in Partnership QRST. The partnership agreement states that Q’s share of income and losses is 30 percent. Q provides services to QRST. Both QRST and Q use a calendar year for tax purposes. The partnership’s financial records for the current year show:
Gross pro?t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $260,000
Guaranteed payments to Q. . . . . . . . . . . . . . . . . . (20,000)
Life insurance premium for Q . . . . . . . . . . . . . . . . . (500)
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . (60,000)
Charitable contributions. . . . . . . . . . . . . . . . . . . . . (9,000)
Net long-term capital gain. . . . . . . . . . . . . . . . . . . 10,000
Q is single, has no other income, and no itemized deductions for the year. Q received the $20,000 guaranteed payments and withdrew an additional $10,000 during the year. Q’s capital account in the partnership was $50,000 at the beginning of the year.
1. Using Form 1065, page 1 as a guide; calculate QRST’s ordinary income for the tax year.
2. Calculate T’s taxable income for the tax year of 2012. T will not be able to itemize deductions.
3. Calculate T’s capital account in the partnership at the end of the tax year.