During the current year, ARC Partnership reported the following items of receipts and expenditures: $500,000 sales, $50,000 utilities, $90,000 rent, $200,000 salaries to employees, $50,000 guaranteed payment to partner Mitchell, investment interest income of $4,000, a charitable contribution of $10,000, and a distribution of $40,000 to partner Rowan. Also, Ava received a $30,000 distribution. Ava is a 50% partner. What items will be reflected on Ava’s Schedule K-1? Assuming Ava’s outside basis at the beginning of the year is $100,000. What will be her ending outside basis at the end of this fiscal year? Is her distribution taxable? If so will it be taxable at her tax rate or at the partnerships?

Additional Information : Separately stated interest income $4,000 Guaranteed payment to partner.…

Answered: During the current year, ARC…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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During the current year, ARC Partnership reported the following items of receipts and expenditures: $500,000 sales, $50,000 utilities, $90,000 rent, $200,000 salaries to employees, $50,000 guaranteed payment to partner Mitchell, investment interest income of $4,000, a charitable contribution of $10,000, and a distribution of $40,000 to partner Rowan. Also, Ava received a $30,000 distribution. Ava is a 50% partner. What items will be reflected on Ava’s Schedule K-1? Assuming Ava’s outside basis at the beginning of the year is $100,000. What will be her ending outside basis at the end of this fiscal year? Is her distribution taxable? If so will it be taxable at her tax rate or at the partnerships?

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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