Kristie is a 30% partner in the KKM Partnership. During the current year, KKM reported gross receipts of $280,000 and a charitable contribution of $30,000 . The partnership paid office expenses of $80,000 . In addition, KKM distributed $20,000 each to partners Kaylyn and Megan, and the partnership paid partner Kaylyn $20,000 for administrative services. Kristie reports the following income from KKM during the current tax year:
a. $54,000 ordinary income; $9,000 charitable contribution.
b. $60,000 ordinary income; $9,000 charitable contribution.
c. $36,000 ordinary income.
d. $54,000 ordinary income.

Kristie reports the following income from KKM during the current tax year: (A) $54,000 ordinary income; $9,000 charitable contribution.

Explanation:

From the provided data;

KKM's net ordinary income = $180,000 ($280,000 ordinary income - $80,000 of office expenses - $20,000 payment to Kaylyn).

Since the cash distributions to Kaylyn and Megan are not deductible.

Kristie's share of this income is equal to

30% of KKM's net ordinary income

= 30% 0f $180,000

=  $54,000.

In addition, Kristie reports 30% of partnership charitable contribution

= 30% of $30,000

= $9,000 of her share of the partnership's charitable contribution.

Therefore, Kristie reports the following income from KKM during the current tax year: $54,000 ordinary income; $9,000 charitable contribution.

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