Answer:
A) $24,000
Explanation:
Assuming that this is the first year that the partnership is in business, Jordan must include in his year 2 tax return all the income received between July 1 and June 30 year 2, and part of the income received between July 1 and December 31 year 2.
The problem is that we are not told how much he received between July and December year 2. 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 year 2.
We have two possible options:
- option 1, total income = $24,000
- option 2, total income = $24,000 + ($72,000 / 2) = $60,000
Since 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.
