PREPARE A K-1 BASED ON THE INFORMATION PROVIDED.

[6] For the current year, the Murray and Parker Partnership had book income of $100,000, which included the following: Long-term capital gain $ 7,000 Sec. 1231 loss (3,000) Dividends 200 Interest paid to partners for use of capital 12,000 The partners share profits and losses equally. What amount of partnership income (excluding all partnership items which must be reported separately) should each partner report in his or her individual income tax return for the current year? A. $47,900 B. $48,000 C. $50,000 D. $53,900 The correct answer is A. A. A partnership's ordinary income is the portion of taxable income not required to be stated separately (Sec. 702(a)(8)]. The interest paid to partners is a guaranteed payment which results in an ordinary deduction. Book income may be adjusted to ordinary income by excluding all items of income and adding back all deduction and loss items, which must be separately stated. The partnership's ordinary income is Book income $100,000 Add back: Sec. 1231 loss 3,000 Subtract: Long-term capital gain (7,000) Dividends (200) Partnership ordinary income $ 95,800 Because the partners share profits and losses equally, each partner's share of partnership income is $47,900 ($95,800 * 50%). B. The dividends must be subtracted to arrive at partnership ordinary income. C. The book income must be adjusted to arrive at partnership ordinary income. D. The partnership ordinary income does not equal $100,800. 651121 Final K-1 Amended K-1 OMB No. 1545-0123 Part III Partner's Share of Current Year Income, Deductions, Credits, and Other Items Ordinary business income foss) 14 Self-employment earnings (loss) 2 Net rental real estate income (loss) Schedule K-1 2021 (Form 1065) Department of the Treasury Internal Revenue Service For calendar year 2021, or tax year beginning 2021 ending Partner's Share of Income, Deductions, Credits, etc. See back of form and separate instructions. Part 1 Information About the Partnership Partnership's employer identification number 3 Other net rental income (loss) 15 Credits 4a Guaranteed payments for services 4b Guaranteed payments for capital 16 Schedule K-3 is attached it checked. B Partnership's name, address, city, state, and ZIP code 4c Total guaranteed payments 17 Alternative minimum lax (AMT) items 5 Interest income 6a Ordinary dividends D IRS center where partnership filed return Check if this is a publicly traded partnership (PTP) Part II Information About the Partner E Partner's SSN or TIN(Do not use TIN of a disregarded entity. See instructions.) 6b Qualified dividends 18 Tax-exempt income and nondeductible expenses 6C Dividend equivalents F Name, address, city, state, and ZIP code for partner entered in E. See instructions. 7 Royalties 8 Net short-term capital gain (loss) 19 Distributions 9a Net long-term capital gain (loss) 9b Collectibles (28%) gain floss) 20 Other information TIN 9c Unrecaptured section 1250 gain 10 Net section 1231 gain (oss) G General partner or LLC Limited partner or other LLC member-manager member H1 Domestic partner Foreign partner H2 If the partner is a disregarded entity (DE), enter the partner's: Name 11 What type of entity is this partner? 12 If this partner is a retirement plan (IRA SEP/Keogh/etc..check here J Partner's share of profit, loss, and capital (see instructions): Beginning Ending Profit % Loss % Capital 96 Check if decrease is due to sale or exchange of partnership interest K Partner's share of liabilities: Beginning Ending Nonrecourse S $ 11 Other income (loss) % 96 12 Section 179 deduction 21 Foreign taxes paid or accrued 13 Other deductions L Qualified nonrecourse financing $ Recourse $ Check this box if Item K includes liability amounts from lower tier partnerships Partner's Capital Account Analysis Beginning capital account Capital contributed during the year $ Current year net income foss). $ Other increase decrease (attach explanation $ Withdrawals and distributions $ Ending capital account 22 More than one activity for at-risk purposes 23 More than one activity for passive activity purposes *See attached statement for additional information. For IRS Use Only Yes M Did the partner contribute property with a built-in gain (loss? No If "Yes," attach statement. See instructions. N Partner's Share of Net Unrecognized Section 704(c) Gain or (Loss) Beginning Ending For Paperwork Reduction Act Notice, see the Instructions for Form 1065. www.irs.gov/Form1066 Cat. No. 11394R Schedule K-1 (Form 1065) 2021