Question
A and B formed a partnership on December 31, 2020. A contributed $60,000 cash. B's investment consisted of cash, $8,000; inventory, $24,000; and supplies, $8,000
A and B formed a partnership on December 31, 2020. A contributed $60,000 cash. B's investment consisted of cash, $8,000; inventory, $24,000; and supplies, $8,000 - all at fair market values. Profit for 2020 and 2021 was $75,000 and $85,000, respectively.
Required:
Calculate the allocation of profit for 2020 and 2021, assuming profits are divided as follows:
a) The partners have no partnership agreement.
b) Based on a 1:3 ratio.
c) Based on the ratio of the partners' original investments.
d) Interest allowances of 10% on their original investments, salary allowances to A of $14,000 and B of $11,000, and the remainder to be divided equally.
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Federal Taxation 2021 Corporations, Partnerships, Estates & Trusts
Authors: Timothy J. Rupert, Kenneth E. Anderson, David S. Hulse
34th Edition
0135919460, 978-0135919460
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