PRINCIPLES OF TAXATION F/BUS.+INVEST.
PRINCIPLES OF TAXATION F/BUS.+INVEST.
22nd Edition
ISBN: 9781259917097
Author: Jones
Publisher: MCG
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Chapter 12, Problem 1QPD

Mr. and Mrs. Velotta are self-employed professional musicians. Their average annual income from performance fees and music lessons is $130,000. The couple wants to shift income to their two children, ages 19 and 22. Can Mr. and Mrs. Velotta organize their music business as a family partnership and give each child a 25 percent interest?

Expert Solution & Answer
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To determine

Explain whether Person V and his wife can organize their music business as a family partnership and give each child a 25 percent interest.

Explanation of Solution

In the professional service business of Person V and his wife, capital is not a material income-producing factor. Hence, for shifting earned income to their children, a family partnership cannot be formed by them.

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