Ariel, Bob, Candice and Dmitri Are Equal Partners in a Local

question 51

Multiple Choice

Ariel, Bob, Candice and Dmitri are equal partners in a local ski resort. The resort reports the following items for the current year: Each partner receives a Schedule K-1 with one-fourth of the preceding items reported to him/her. How must each individual report these results on his/her Form 1040?

• A) $100,000 income on Schedule E; $1,000 short-term capital gain on Schedule D
• B) $112,500 income on Schedule E; $1,000 short-term capital gain on Schedule D
• C) $300,000 income on Schedule E; $26,750 short-term capital gain on Schedule D
• D)$1,200,000 income on Schedule E; $107,000 short-term capital gain on Schedule D

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Definitions:

Federal Personal Income Tax

A tax levied by the federal government on the yearly income of individuals, with the rate applied varying according to the income level.

Progressive Taxes

A tax system in which the tax rate increases as the taxable amount increases, placing a higher tax burden on individuals with higher incomes.

Proportional Taxes

A tax system where the tax rate remains constant regardless of the amount on which the tax is imposed, resulting in taxes being proportionate to the income.

Direct Taxes

Taxes paid directly to the government by the individual or organization on whom it is levied, such as income tax or property tax.