Revision Question 5
Timmy and Tammy are in partnership in equal shares and carry on a business of selling comic books. They agree that Timmy will receive a wage of $50,000 because he works in the shop. Tammy received interest of $20,000 on her partnership capital account. Timmy has wages from his lecturing job of $70,000 and Tammy has unfranked dividends of $60,000. Both have individual gift deductions in the amount of $4,500 for Timmy and $3,500 for Tammy. They do not employ any staff.
The accounts for the 2018 tax year showed the following:
Sales of comic books $440,000
Purchase of comic books $225,000
Value of comic books on hand 30 June 2017 $85,000
Value of comic books on hand 30 June 2018 $46,000
Wages to Timmy $50,000
Interest to Tammy on her capital account $20,000
Shop Rent $30,000
Electricity and Telephone for the shop $7,000
- What is the net income or net loss of the partnership for the 2018 tax year?
Net Income = AI -D with modifications
- What is the distribution of the net income or net loss of the partnership between the partners for the 2018 tax year?
- Allocate the salary to partner
- Allocate the interest paid to the partner on the partners capital account
- Fixed % currently 50/50
- What is the taxable income of each of the partners for the 2018 tax year?
Timmy = AI- D
Tammy = AI- D