Question #21 - Partnership Income Allocation (2 marks)

Dagne Rayson and Sara Lockhart are both doctors.As Dagne is the more experienced practitioner, the partnership

agreement calls for her to receive a salary of $60,000 per year, with remaining profits split equally between the two

partners. For the current year, the Income Statement in the accounting records for the partnership is as follows:

Rayson and Lockhart - Partnership Income Statement

Current Year Ending December 31, 2019

Revenues $536,340

Actual Eligible (15% gu) Dividends Received from Canadian Corporations 7,000

Gain on Sale of Shares of Canadian Public Corporations 14,000

Total Revenues $557,340

Expenses:

Salary to D Rayson ($60,000)

Salaries to office staff ( 29,000)

Office rent ( 62,000)

Office supplies ( 5,000)

CCA on office equipment ( 17,000)

Charitable donations ( 13,000)

Drawings by D Rayson ( 170,000)

Drawings by S Lockhart ( 170,000)

Net Income $ 21,340

The current revenues include the December 31, 2019 balance of work in process of $120,000.The corresponding balance

as at the previous December 31, 2018 year end was 80,000, and this amount was included in the accounting revenues for

that year.While the two partners have chosen to include work in process as a revenue in their accounting statements,

they have elected under ITA 34 to exclude these amounts from their Net Income for Tax Purposes.

Required:

Calculate the minimum Net Business Income for the partnership's current year and indicate the amount that will be added

to each partner's Net Income for Tax Purposes as a result of belonging to the partnership during the current year. (4

marks)