A partnership begins it first year (January 2017) with the following capital balances: Alfred, Capital 120,000 Bernard, Capital 90,000 Collins 75,000 The articles of partnership stipulate that profits and losses be assigned in the following manner: Each partner is allocated interest equal to 10% of the beginning capital balance. Bernard and Collins are each allocated $15,000 of compensation per year. Any remain profits and losses are allocated on a 3:4:3 basis, respectively Each partner is allowed to withdraw up to $10,000 cash per year. Assume that the net income is $60,000 in 2017 and that each partner withdraws the maximum amount allowed.

1. Which of the following statements is true?
   1. ABC Partnership will pay tax on the $60,000 income.
   2. Bernard will pay tax on the 10,000 draw.
   3. Bernard will pay tax on the income allocated to Bernard.
   4. All of the above