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Riley and Layla are interested in forming a partnership but are concerned about the associated taxes. If the partnership agreement is set such that80% of

Riley and Layla are interested in forming a partnership but are concerned about the associated taxes. If the partnership agreement is set such that80% of earnings go to Riley and20% go to Layla, which of the following correctly describes how taxes will be paid on the earnings? (1 point)

  • The partnership itself will pay the tax on total earnings before the earnings are distributed to Riley and Layla.
  • Riley and Layla will each pay personal income tax on half of the partnership's total earnings regardless of how the earnings are distributed.
  • Riley and Layla will each pay personal income tax on the portion of earnings that is theirs.
  • The partnership itself will pay the tax on each portion of earnings after they have been distributed to Riley and Layla.

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