What is Rex's gross income from the partnership in 2018 and 2019?

Rex became a partner with a 30% interest in the partnership profits when he invested $200,000. In 2018, the partnership generated $400,000 of taxable income, and Rex withdrew $100,000. In 2019, the partnership had $600,000 of taxable income, and Rex withdrew $200,000. What is Rex's gross income from the partnership in 2018 and 2019?

Solutions

Expert Solution

Rex must include in his gross income his share of the partnership’s income, regardless of whether his share of the profits is actually distributed to him. Therefore, Rex must recognize as gross income from the partnership $120,000 ($400,000 × 30%) in 2018 and $180,000 ($600,000 × 30%) in 2019. The withdrawal of $200,000 merely reduces Rex’s basis for his partnership interest.

Rex must recognize as gross income from the partnership $120,000 in 2018 and $180,000 in 2019.

Renze Joy Candido answered 1 year ago

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