Partnership Transactions: Partner and Partnership
Partnership EFGH is a calendar year, accrual basis partnership. Partner G is a calendar year, cash basis partner. Partnership EFGH rents property from Partner G. EFGH pays market rate rent of $4,000 per month. EFGH also pays G a guaranteed payment of $10,000 per month for services performed.
The following transactions occurred near year end:
- The December rent payment for the current year wasnot received by G until January 5th of the subsequent year.
- The December guaranteed payment was not received by G until January 10th of the subsequent year
1. In what tax year should EFGH deduct the December rent payment and in what year should G include this payment in his tax return?
EFGH should deduct the December payment in the following year as already was received late. Also, G should include the return on that following year as it was received.
2. In what year, should the EFGH deduct the December guaranteed payment and in what year should G include this payment in tax return?
I am thinking that EFGH should have deduct the December guaranteed payment when the due date was it, and place it for the following year as tax return.
Calculating Partnership Ordinary Income/Loss and Partner Taxable Income
Partner Qis 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 andQ use a calendar year for taxpurposes. The partnership's financial records for the current year show:
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $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.
3. Using Form 1065, page 1 as a guide; calculate QRST's ordinary income for the tax year.
4. Calculate Q's taxable income for the tax year of 2012. Q will not be able to itemize deductions.
5. Calculate Q's capital account in the partnership at the end of the tax year.