Kim Received a One-Third Profits and Capital Interest in Bright

question 102

Multiple Choice

Kim received a one-third 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 $23,000 guaranteed payment each year for ongoing services she provides to the LLC. For X4, Bright Line reported the following revenues and expenses: sales-$143,000, cost of goods sold-$83,000, depreciation expense-$40,000, long-term capital gains-$8,000, qualified dividends-$5,300, and municipal Bond interest-$3,300. How much ordinary business income (loss) will Bright Line allocate to Kim on her Schedule K-1 for X4?

• A)($13,000)
• B)$6,000
• C)$8,000
• D)$13,000
• E)None of the choices will be reported as ordinary business income (loss)on Schedule K-1.

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Definitions:

Business

An organization or economic system where goods and services are exchanged for one another or for money.

Goods and Services

The tangible products (goods) and intangible activities (services) that fulfill the needs or wants of consumers.

Factor Market

A marketplace where factors of production (e.g., labor, capital) are bought and sold.

Circular-Flow Diagram

A graphical outline that tracks the flow of monetary resources through markets, between companies and household sectors.