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arushi_13
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Joined: 09 Feb 2008
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Posted: 13 Jul 2009 at 11:39 \| IP Logged

Dale's distributive share of income from the calendar year partnership of Dale and Eck was $50,000 in 2005. On Dec 15,2005 Dale who is a cash basis tp received a 27k distribution of the partnership's 2005 income, with the $23,000 balance paid to Dale in Feb 2006. In addition, Dale received a $10,000 interest free loan from the partnership in 2005. This $10k is to offset against Dale's share of 2006 partnership income. What amount of the partnership income is taxable to Dale in 2005.

Ans: 50k.I understand why it is 50k.

In the explanation the following sentence is given which creates confusion for me..
" The 10k interest free loan does NOT effect the pass through of income for 2005, and the $10k offset against Dale's distributive share of partnership income for 2006 will NOT effect the pass through of that income in 2006."What I do not understand is the Q specifically says that the 10k loan is offset against Dale's share of 2006 P'ship income then why is it stated otherwise or maybe I m just NOT understanding it right..

Thanks a lot.

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bryris
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Joined: 07 Dec 2008
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Posted: 13 Jul 2009 at 12:28 \| IP Logged

Its a stupid question. That is my take on it.

All partnership income is taxed whether distributed or not. It sounds to me like the partner received 27k in 2005, and then received a loan of 10,000k instead of his share of income for 2005. Maybe he needed the money now or something. The best I can come up with is this was some sort of advance payment for the 2006 distribution.

The explanation is merely saying to not complicate the basic rule that income is taxed. 50,000 inc = 50,000 to be taxed.

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