For the Current Year, Gamma Partnership Has $60,000 Net Operating

question 2

Multiple Choice

For the current year, Gamma Partnership has $60,000 net operating revenues before consideration of any payment to its two equal partners, G and H.During the year, Gamma made a $25,000 guaranteed payment to Partner G.It also distributed $5,000 cash to both G and H.Gamma and its two partners all use the calendar year for tax purposes.Based on these facts, how much partnership income should G and H report on their current year individual returns?

• A)Both G and H should report $30,000 of partnership income.
• B)Both G and H should report $17,500 of partnership income.
• C)Both G and H should report $12,500 of partnership income.
• D)G should report $42,500 and H should report $17,500 of partnership income.
• E)G should report $37,500 and H should report $12,500 of partnership income.

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Definitions:

Congress

The national legislative body of the United States, consisting of the Senate and the House of Representatives.

Chapter 13

A form of bankruptcy in the United States that allows individuals with a regular income to develop a plan to repay all or part of their debts.

Repayment Plan

A strategy or arrangement agreed upon to pay back borrowed money, often detailing the time frame and amounts due.

Insolvent

The condition of being unable to pay debts as they fall due, or having liabilities that exceed the value of assets.