Matt and Joel are equal partners in the MJ Partnership. For the current year end
ID: 2500743 • Letter: M
Question
Matt and Joel are equal partners in the MJ Partnership. For the current year ended December 31, the partnership has book income of $80,000, which includes the following deductions: (1) guaranteed payments (salaries) to partners: Matt, $35,000; and Joel, $25,000; and (2) charitable contributions, $6,000. The book income amount does not include any sales of capital assets or Sec. 1231 assets or any tax-exempt income. Based on the above information, what amount should be reported as ordinary income on the partnership return?
Explanation / Answer
Ordinary Income to be reported on the Partnership Return = $ 80,000 Less Salaries to partners $ 60,000 ($ 35,000 + $ 25,000) less deduction for Charitable Contributions $ 6,000 = $ 14,000.