Ron sold securities for a $20,000 short-term capital loss during the current year, but he has no personal capital gains to recognize The R&A General Partnership, which Ron has a 50% capital profits and loss interest, reported a $36,000 short-term capital gain this year. In addition, the partnership earned $44,000 of ordinary income. Ron's only partner, Amy, agrees to divide the year's income as follows (Click the icon to view the partners' share of income.) Both partners and partnership use a calendar year-end, and both partners have a 35% marginal tax rate Read the requirements Requirement a. Have the partners made a special allocation of income that has substantial economic effect? This special allocation fails the substantial economic effect test and will not be acceptable to the IRS In particular, shifting occurs allocation reduces the partners' total tax liability because the special allocation does not alter the partners' capital accounts, and the special Requirement b. What amount and character of income must each partner report on his or her lax return? Character Ron Amy Data Table Short-term capital gain Ordinary income Type of income Total Ron Amy Short-term capital gain S 36,000 $ 44,000 20.000 S 20.000 16.000 24.000 Ordinary income Print Done Ron sold securities for a $20,000 short-term capital loss during the current year, but he has no personal capital gains to recognize The R&A General Partnership, which Ron has a 50% capital profits and loss interest, reported a $36,000 short-term capital gain this year. In addition, the partnership earned $44,000 of ordinary income. Ron's only partner, Amy, agrees to divide the year's income as follows (Click the icon to view the partners' share of income.) Both partners and partnership use a calendar year-end, and both partners have a 35% marginal tax rate Read the requirements Requirement a. Have the partners made a special allocation of income that has substantial economic effect? This special allocation fails the substantial economic effect test and will not be acceptable to the IRS In particular, shifting occurs allocation reduces the partners' total tax liability because the special allocation does not alter the partners' capital accounts, and the special Requirement b. What amount and character of income must each partner report on his or her lax return? Character Ron Amy Data Table Short-term capital gain Ordinary income Type of income Total Ron Amy Short-term capital gain S 36,000 $ 44,000 20.000 S 20.000 16.000 24.000 Ordinary income Print Done