Debra Wanted to Form a Partnership with Lawrence

question 38

Multiple Choice

Debra wanted to form a partnership with Lawrence.He agreed and they became co-owners in an equal partnership.This year,after expenses,the partnership had a profit of $200,000.How will the taxation of this profit be handled?

• A)Since the partnership was Debra's idea,she will pay income tax on the profit on her personal tax return.
• B)The business will pay half of the tax liability,and Debra and Lawrence will pay the other half.
• C)Debra and Lawrence must both pay tax on the business's profit.
• D)The business itself will pay the taxes on the business's profit.

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