Question
On January 1, 20X9, Mr. Maxfield and Mr. Leland each contributed $100,000 to form the M&L general partnership. Their partnership agreement states that they will
On January 1, 20X9, Mr. Maxfield and Mr. Leland each contributed $100,000 to form the M&L general partnership. Their partnership agreement states that they will each receive a 50% profits and loss interest. The partnership agreement also provides that Mr. Maxfield will receive an annual $36,000 guaranteed payment. M&L began business on January 1, 20X9. For its first taxable year, its accounting records contained the following information. Gross receipts from sales $150,000
Cost of Sales ($220,000)
Gross Profit ($70,000)
Guaranteed payments to Mr. Blue ($36,000)
Interest Paid on business debt ($3,000)
Dividend Income $500
Tax exempt interest $1,500
Operating expenses ($138,000)
Depreciation expense ($9,000)
Sec. 1231 Gains $8,000 The $3,000 of interest was paid on a $60,000 loan made to M&L by Key Bank on June 30, 20X9. M&L repaid $10,000 of the loan on December 15, 20X9. Neither of the partners received a cash distribution from M&L in 20X9. Complete the following items related to Mr. Maxfield's interest in M&L partnership:
A. Mr. Maxfield
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