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A partnership is owned by a mother (60%) and her son (40%). Their capital accounts are maintained in the same ratio.

A partnership is owned by a mother (60%) and her son (40%). Their capital accounts are maintained in the same ratio. The son received his ownership interest as a gift from his mother several years ago. Partnership income for the current year was $50,000. Although the mother performed services valued at $10,000, there was no entry on the partnership books and she received no cash for her services. To avoid a reallocation by the IRS, what amount should be allocated to the mother?


$20,000

$30,000

$34,000

$40,000

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4 comments
  • I think it is $40,000. 60% of $50,000 + $10,000
    • TaxStudent
    • Apr 04, 2018 at 7:33pm
  • You need to deduct the 10,000 of the performed services of the mother from the partnership income.
    • dinamarcanete
    • Apr 04, 2018 at 7:36pm
  • compensation to the mother is an expense in the partnership
    • dinamarcanete
    • Apr 04, 2018 at 7:38pm
  • oic
    • TaxStudent
    • Apr 04, 2018 at 7:42pm

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