Wayne owns a 30% interest in the capital and profits of Emerald Company (a calendar year partnership). For tax year 2017, the partnership earned revenue of $900,000 and had operating expenses of $660,000 . During the year, Wayne withdrew from the partnership a total of $90,000 . He also invested an additional $30,000 in the partnership. For 2017, Wayne's gross income from the partnership is:
a. $72,000.
b. $90,000.
c. $132,000.
d. $162,000.
a
RATIONALE: Wayne must report as his gross income 30% of the partnership profits, 30% × ($900,000 – $660,000) = $72,000 . The $90,000 is a return of capital. The $30,000 is a contribution to capital.
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