Homework Answers
a-1) ordinary income (loss) is allocated to Gary for the year:-
| Particular | Total Amount (in$) | Allocated to Gray |
| Sales revenue | 83200 | |
| Less:- | ||
| Cost of goods sold | (40700) | |
| Depreciation | (16600) | |
| Employees wages | (16600) | |
| Other expenses | (4800) | |
| Guaranteed income | (19000) | |
| Ordinary business loss | (14500) | $(14500)*45/100= $6525 |
Ordinary business income (loss) = Total revenue - Total expenses
= $83200-$40700-$16600-$16600-$4800-$19000 = $(14500)
The sharing ratio between them is 45:55
Gray share will be 45/100,prudence share ratio will be 55/100
Gray allocation 45:55
$(14500)*45/100 = $6525
a-2) Gray separately stated items and self employment :-
| Separate stated items on 1 schedule K-1 | Total Amount (in$) | Gray allocation |
| Gain on sale of bond | 6300 | 6300*45/100=2835 |
| Cash charitable | (3400) | (3400)*45/100=1530 |
| Guaranteed payment | 19000 | 19000 |
| Municipal bond trust | 5600 | 5600*45/100=2520 |
| Self employment income | 19000-14500= 4500 | 19000-6525=12475 |
Self employment income = Guaranteed payment-ordinary loss
= $19000 - $14500 = $4500
Self employment income allocation to Gray = GuranGuara payment - ordinary loss allocated to Gray
= $19000 - $6525 =$12475
b) If G&P is a limited partnership and Gray is a limited partner...than his self employment income will be equal to his guaranteed payment..so,
Self employment income= Guaranteed payment =$19000
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