Question

Jordan files his income tax return on a calendar-year basis. he is the principal partner of a partnership reporting on a june 30 fiscal year end basis. jordan's share of the partnership's ordinary income was $24,000 for the fiscal year ended june 30, 2017, and $72,000 for the fiscal year ended june 30, 2018. how much should jordan report on his 2017 individual income tax return as his share of taxable income from the partnership?

Answer 1

Answer:

A) $24,000

Explanation:

Assuming that this is the first year that the partnership is in business, Jordan must include in his 2017 tax return all the income received between July 1 and June 30 2017, and part of the income received between July 1 and December 31 2017.

The problem is that we are not told how much he received between July and December 2017. If Jordan is paid a salary, then we should include half of $72,000, but we are not given any specific details.

We can also assume that he only receives money at the end of the partnership's fiscal year, so he only received $24,000 during 2017.

We have two possible options:

• option 1, total income = $24,000
• option 2, total income = $24,000 + ($72,000 / 2) = $60,000

Sine option 2 is not given as a possible answer, I will go for option 1.

The IRS establishes that income must be considered during the taxable year that results in the least deferral of income, i.e. you must pay your taxes as soon as possible.