Calculating Partnership Ordinary Income/Loss and Partner Taxable Income

Partner Q is a partner in Partnership QRST. The partnership agreement states that Qs share of income and losses is 30 percent. Q provides services to QRST. Both QRST and Q use a calendar year for tax purposes. The partnerships financial records for the current year show:

Gross prot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $260,000

Guaranteed payments to Q. . . . . . . . . . . . . . . . . . (20,000)

Life insurance premium for Q . . . . . . . . . . . . . . . . . (500)

Operating expenses . . . . . . . . . . . . . . . . . . . . . . . (60,000)

Charitable contributions. . . . . . . . . . . . . . . . . . . . . (9,000)

Net long-term capital gain. . . . . . . . . . . . . . . . . . . 10,000

Q is single, has no other income, and no itemized deductions for the year. Q

received the $20,000 guaranteed payments and withdrew an additional $10,000

during the year. Qs capital account in the partnership was $50,000 at the beginning of the year.

Using Form 1065, page 1 as a guide; calculate QRSTs ordinary income for the tax year.

Calculate Qs taxable income for the tax year of 2012. T will not be able to itemize deductions.

Calculate Qs capital account in the partnership at the end of the tax year.