Kim received a 1/3 profits and capital interest in Bright Line, LLC in exchange for legal...

Kim received a 1/3 profits and capital interest in Bright Line, LLC in exchange for legal services she provided. In addition to her share of partnership profits or losses, she receives a $28,000 guaranteed payment each year for ongoing services she provides to the LLC. For X4, Bright Line reported the following revenues and expenses: Sales - $148,000, Cost of Goods Sold - $88,000, Depreciation Expense - $44,000, Long-Term Capital Gains - $13,000, Qualified Dividends - $5,800, and Municipal Bond Interest - $3,800. How much ordinary business income (loss) will Bright Line allocate to Kim on her Schedule K-1 for X4?

($12,000).
$6,400.
$10,200.
$16,000.
None of the choices will be reported as ordinary business income (loss) on Schedule K-1.

Expert Solution

Schedule K-1 form is which partnership firms discloses share of partners

In the income, losses, deduction, credits etc. of the partnership firms.

Ordinary business income calculation is as follows.

No other income would be included in ordinary business income. Except regular income from routine business.

Kim's share in ordinary business income is calculated as follows.

$5,333.33 would be the amount that Bright line LLC would allocate to kim on here K- 1 schedule.

Note.

Long term capital gains, qualified dividends, municipal bonds interest, guaranteed income

This items are showed separately in schedule k-1 and are not to be included with ordinary business income/loss.

ekkarill92 answered 4 months ago

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