TAXATION LAW

Ray and Louie are partners in an online business. According to their partnership agreement, the two men must share profits on a 30% / 70% basis after any partners salary. Losses are shared on a 30% / 70% basis.

The agreement also allows for salary payments of $5,000 each. At the end of the financial year, their partnership profit and loss show that Ray and Louie have been paid a salary of $5,000 each and the business made an accounting net loss of $26,000 (after paying the above-mentioned salaries).

Required

Calculate the partnership distribution for each partner.

Students must give reasons for their answer. This discussion must include an analysis of the pertinent sections of the relevant legislation, rulings, and the relevant case law. If relevant, students must show calculations.