Roger, Ellen, Drew and Cindy are equal partners in a local pub. The pub reports the following items for the current year: Business revenue$1,770,000Business expenses 1,000,000Investment expenses 160,000Each partner receives a Schedule K-1 with one-fourth of the preceding items reported to him/her. How must each individual report these results on his/her Form 1040?

A. $770,000 on Schedule E; $160,000 on Schedule A.

B. $385,000 on Schedule E; $40,000 on Schedule A.

C. $257,667 on Schedule E; $40,000 on Schedule A.

D. $192,500 on Schedule E; $40,000 on Schedule A.

Question

Business

Dominique Rojas

24 February, 00:18

Roger, Ellen, Drew and Cindy are equal partners in a local pub. The pub reports the following items for the current year: Business revenue$1,770,000Business expenses 1,000,000Investment expenses 160,000Each partner receives a Schedule K-1 with one-fourth of the preceding items reported to him/her. How must each individual report these results on his/her Form 1040?

A. $770,000 on Schedule E; $160,000 on Schedule A.

B. $385,000 on Schedule E; $40,000 on Schedule A.

C. $257,667 on Schedule E; $40,000 on Schedule A.

D. $192,500 on Schedule E; $40,000 on Schedule A.

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Answers (1)

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Abagail Stein · Answer 1

Answer: D-$192,500 on Schedule E; $40,000 on Schedule A.

Explanation: The pub reports the following items for the current year:

Business revenue : $1,770,000

less:

Business expenses $1,000,000

Profit for the year $770,000

divided by 4 = $770,000/4 = $192,500 will be recorded on schedule E by each partner.

Investment expenses will be reported under schedule A as $160,000/4 = $40,000 by each of them