T&C Printing is a stationery store operated in partnership by Tim and Caitlin. The partnership agreement provides
Question:
T&C Printing is a stationery store operated in partnership by Tim and Caitlin. The partnership agreement provides the following:
- an annual salary of $35,000 to Caitlin for working full-time in the business
- a superannuation payment for Caitlin equal to 10% of Caitlin’s annual salary
- interest to be paid at the rate of 15% on each partner’s capital contribution with Tim contributing $90,000 and Caitlin $30,000 respectively,
Apart from the above, Tim and Caitlin otherwise share partnership profits equally.
Tim advanced $15,000 to the business as working capital on 1 May 2020. interest at the rate of 5% p.a. to be paid on any loan made to the partnership.
The net profit (adjusted partnership net income) of the partnership after allowing for the above particular outlays and other operational expenses was $150,000 for the year ended 30 June 2021.
In addition, T&C Printing sold shares in Qantas Ltd on 8 November 2020 for $15,420. These shares were purchased on 27 April 2007 for $9,170
Other information
Tim had a capital loss from previous years of $2,000 from sale of painting
Caitlin also had capital losses from previous years of $500 from the sale of shares.
Required
- Calculate partnership net income and the profit distribution to each partner.
- Calculate each partner’s taxable income.
