FredCo and Fran are equal partners in the calendar year F & F Partnership. FredCo uses a fiscal year ending June 30, and Fran uses a calendar year. FredCo receives an annual guaranteed payment of $50,000. F & F’s taxable income (after deducting FredCo’s guaranteed payment) is $40,000 for 2010 and $50,000 for 2011.
a. How much income from the partnership must FredCo report for its tax year ending June 30, 2011?
b. How much income from the partnership must Fran report for her tax year ending December 31, 2011?
c. Assume FredCo’s annual guaranteed payment is increased to $60,000 starting on January 1, 2011, and the partnership’s taxable income for 2010 and 2011 (after deducting FredCo’s guaranteed payment) is the same (i.e., $40,000 and $50,000, respectively). What is the amount of income from the partnership that FredCo must report for its tax year ending June 30, 2011?
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