On December 31 of last year, Rachel gave her daughter, Courtney, a gift of a 25%...
On December 31 of last year, Rachel gave her daughter, Courtney, a gift of a 25% interest in a partnership in which capital is a material income-producing factor. For the current calendar year, the partnership's ordinary income was $200,000. Rachel and Courtney were the only partners, and there were no guaranteed payments. Rachel's services performed for the partnership were worth $40,000, and Courtney has never performed any services. What is Courtney's distributive share of partnership income for the current year?
A- $100,000
B- $80,000
C- $50,000
D- $40,000.
E- None of the above.
Homework Answers
| answer | ||
| Option D --- $ 40,000 | ||
| solution | ||
| Ordinary Income | $200,000 | |
| less: Rachel's services | ($40,000) | |
| balance Income | $160,000 | |
| Courtney's share = | ||
| = $160,000 * 25% | $ 40,000 | |
| note | ||
| The Rachel's Service should be deduct from partnership income because Courtney didn’t share the services. Its fully belongs to Rachel | ||
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