Iris and Jeong File a Joint Return

question 98

Essay

Iris and Jeong file a joint return.Iris is an executive with a corporation,earning a $800,000 salary.Jeong is a 50% partner in JK Partnership.He works full-time in the partnership.Jeong's basis in his partnership interest at the beginning of the year is $1 million.In the current year,the partnership reports an ordinary loss of $1.2 million,half of which is allocated to Jeong.There were no separately stated items,no distributions made and no changes in liabilities.Iris and Jeong earned $100,000 of dividend income from their investment portfolio.They do not itemize deductions.
a.Determine 2019 taxable income for Iris and Jeong.
b.Discuss the treatment of any income or loss items not recognized in 2019.

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Definitions:

Stock Split

An increase in a firm’s shares outstanding without any change in owner’s equity.

Retained Earnings

Profit that is not distributed to the shareholders but is kept by the company for future investment or to pay off debt.

Dividend Income

Income received from owning shares of a company in the form of dividends.