Phil and Bill Each Own a 50 Percent Interest in P&B

question 33

Multiple Choice

Phil and Bill each own a 50 percent interest in P&B Interests. P&B Interests has ordinary income for the year of $35,000 before guaranteed payments to Phil. If Phil receives guaranteed payments of $25,000 during the tax year, what is the total income or loss that should be reported by Bill from the partnership for this tax year?

• A)$5,000 income
• B)$17,500 income
• C)$25,000 income
• D)$30,000 income
• E)None of the above

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Definitions:

Dividends

Distributions given to the shareholders of a corporation, typically sourced from the profits of the business.

Pro Forma Net Income

An estimation of net income for a future period, assuming certain projections or events occur.

Profit Margin

Profit Margin is a financial metric that measures the percentage of revenue that exceeds the cost of goods sold, indicating how much profit a company retains from its sales.

Sales Increase

An upward movement in the volume or value of products or services sold by a company over a given period.