Ray, Carol, and Jack are equal partners in the RCJ Partnership, which uses the accrual method of
Question:
Ray, Carol, and Jack are equal partners in the RCJ Partnership, which uses the accrual method of accounting. All three materially participate in the business. RCJ reports financial accounting income of $156,000 for the current year. The partnership used the following information to determine financial accounting income.
The following additional information is available about the current year's activities.
Requirement
a. What is RCJ's financial accounting income?
RCJ's financial accounting income is | . |
Requirements b, c, and d. What is RCJ's partnership taxable income? What is RCJ's ordinary income (loss)? What are RCJ's separately stated items?
Begin by determining the partnership's taxable income, then ordinary income (loss), and finally separately stated items. (If a box is not used in the table leave the box empty; do not enter a zero. Use parentheses or a minus sign for loss and expenseamounts.)
Taxable | |
Income | |
Income | |
Operating profit | |
Rental income | |
Interest on municipal bonds | |
Interest on corporate bonds | |
Dividend income | |
Gain on investment land | |
Long-term capital gain | |
Short-term capital loss | |
Sec. 1231 gain | |
Unrecaptured Sec. 1250 gain | |
Expenses | |
Depreciation | |
Interest expense on mortgage | |
Interest expense on municipal bond loan | |
Guaranteed payment | |
Low-income housing expenditures | |
Total |
Ordinary |
Income |
Separately |
Stated Items |
Data Table
Operating profit (excluding the items listed below) | $42,900 |
Rental income | 23,000 |
Interest income: | |
Municipal bonds (tax-exempt) | 13,000 |
Corporate bonds | 3,100 |
Dividend income (all from less-than-20%-owned domestic corporations) | 23,000 |
Gains and losses on property sales: | |
Gain on sale of land held as an investment (contributed by Ray six | |
years ago when its basis was $7,000 and its FMV was $19,000) | 65,000 |
Long-term capital gains | 30,000 |
Short-term capital losses | 3,000 |
Sec. 1231 gain | 7,000 |
Unrecaptured Sec. 1250 gain | 37,000 |
Depreciation: | |
Rental real estate | 14,000 |
Machinery and equipment | 32,000 |
Interest expense related to: | |
Mortgages on rental property | 23,000 |
Loans to acquire municipal bonds | 6,000 |
Guaranteed payments to Ray | 10,000 |
Low-income housing expenditures qualifying for credit | 26,000 |
• | The partnership received a $1,400 prepayment of rent for next year but has not recorded it as income for financial accounting purposes. |
• | The partnership recorded the land for financial accounting purposes at $19,000. |
• | MACRS depreciation on the rental real estate and machinery and equipment were $14,000 and$33,000, respectively, in the current year. |
• | MACRS depreciation for the rental real estate includes depreciation on the low-income housing expenditures. |
South Western Federal Taxation 2016 Corporations Partnerships Estates and Trusts
ISBN: 9781305399884
39th edition
Authors: James Boyd, William Hoffman, Raabe, David Maloney, Young