This Year, Reggie's Distributive Share from Almonte Partnership Includes $8,000

question 97

Essay

This year, Reggie's distributive share from Almonte Partnership includes $8,000 of interest income, $4,000 of dividend income, and $60,000 ordinary business income.
A. Assume that Reggie materially participates in the partnership. How much of his distributive share from Almonte Partnership is potentially subject to the Medicare contribution tax?
A. If Reggie materially participates in the business, the ordinary income is not passive to him and should not be subject to the Medicare contribution tax. The $8,000 of interest income and the $4,000 of dividend income are potentially subject to the Medicare contribution tax.
B. Assume that Reggie does not materially participate in the partnership. How much of his distributive share from Almonte Partnership is potentially subject to the Medicare contribution tax?
B. If Reggie is not a material participant in the partnership the $8,000 of interest income, the $4,000 of dividend income, and the $60,000 of ordinary business income are potentially subject to the Medicare contribution tax.

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Definitions:

Permanent/Temporary

Describes the nature of employment or accounting entries; permanent implies longevity or continuity, whereas temporary indicates a limited duration or interim status.

Normal Balance

The normal balance is the side (debit or credit) of an account that is expected to have a higher balance based on the accounting equation.

Financial Statement(s)

Reports summarizing the financial performance, position, and cash flows of a business over a specified period, including balance sheet, income statement, and cash flow statement.

Permanent/Temporary

Defines classifications of accounts in accounting where permanent accounts refer to balance sheet items that carry over into the next fiscal period, while temporary accounts are closed at the end of each accounting period.