Fred is a 30% general partner in Calico Partnership. The partnership had ordinary income of $260,000 before any guaranteed payments. Fred received a guaranteed payment of $30,000. He also took a cash distribution of $40,000. Fred's tax basis in his partnership interest at the beginning of the year was $140,000. His marginal tax rate is 32%. Fred qualifies for the QBI deduction (partnership income allocation multiplied by 20%). Answer the following questions: 1. What is the total amount of cash received by Fred? 2. What is the total amount of income he will report on his tax return including his guaranteed payment? 3. What is the total amount of Fred's taxable income (income less QBI deduction)? 4. What is Fred's after tax cash balance?
1.Total amount of cash received by Fred:
Ordinary income of fred from partnership=260000*30%=78000
Add:Guaranteed Payment =30000
Total amount of Cash=148000/-
(Partnership interest is not taxable in hands of partner)
2.Total amount of income he will report on his tax return including his guaranteed payment=148000/-
3.Total amount of Fred's taxable income(income less QBI Deduction):
Income after Deduction=118400
4.Fred's after tax cash balance:
Less:Tax @ 32%=37888
After tax Cash Balance=80512
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