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

question 125

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 $30,000 guaranteed payment each year for ongoing services she provides to the LLC. For X4, Bright Line reported the following revenues and expenses: sales-$150,000, cost of goods sold-$90,000, depreciation expense-$45,000, long-term capital gains-$15,000, qualified dividends-$6,000, and municipal bond interest-$3,000. How much ordinary business income (loss) will Bright Line allocate to Kim on her Schedule K-1 for X4?

• A)($15,000)
• B)$6,000
• C)$9,000
• D)$15,000
• E)None of the choices will be reported as ordinary business income (loss)on Schedule K-1.

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Definitions:

Puzzle Pieces

Individual elements that, when correctly assembled together, form a complete picture or solution, often used metaphorically to describe the solving of complex problems.

Sensory Deprivation

The reduction or elimination of sensory stimuli from one or more of the senses, typically used for relaxation or in various experiments.

Perceptual

Relating to the ability to interpret or become aware of something through the senses.

Cognitive

Relating to the mental action or process of acquiring knowledge and understanding through thought, experience, and the senses.