Because it was anticipated that Bob Short would devote more time to the partners
ID: 2421502 • Letter: B
Question
Because it was anticipated that Bob Short would devote more time to the partnership than would his equal partner Jack Long, it was agreed that Bob would receive a "salary" of $ 12,000 per year. Bob and Jack agreed to divide the remaining partnership income equally. For the current year, prior to consideration of Bobs salary, the partnership income was composed of $6,000 long-term capital gain, $2,000 tax-exempt interest, and $8,000 loss from operations. Determine the amount and character of income (loss) reportable by Bob and Jack for the current year.Explanation / Answer
Bob Jack
Long term Capital Gain 3,000 3,000
Tax free interest 1,000 1,000
Loss from operation 10,000 10,000
(Business Loss)
Salary Income 12,000