Donald Owns a 45% Interest in a Partnership That Earned

question 11

True/False

Donald owns a 45% interest in a partnership that earned $130,000 in the current year. He also owns 45% of the stock in a C corporation that earned $130,000 during the year. Donald received $20,000 in distributions from each of the two entities during the year. With respect to this information, Donald must report $78,500 of income on his individual income tax return for the year.

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Definitions:

Posttax Distribution

The distribution of income or assets among various groups after accounting for the effects of taxation.

Transfer Distribution

The allocation or reallocation of income or wealth through mechanisms other than market transactions, such as taxation or welfare payments.

Noncash Transfer

A government transfer payment in the form of goods and services rather than money, for example, food stamps, housing assistance, and job training; also called in-kind transfers.