Question

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?

Answer 1

1.Total amount of cash received by Fred:

Ordinary income of fred from partnership=260000*30%=78000

Add:Guaranteed Payment =30000

Add:Cash Distribution=40000

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):

Total amount=148000

Less:Qbi Deduction(20%)=29600

Income after Deduction=118400

4.Fred's after tax cash balance:

Amount =118400

Less:Tax @ 32%=37888

After tax Cash Balance=80512