Martin and Joe are equal partners in Ferrell Company.For the current year,Ferrell Company reports the following items of income and expense:
$\begin{array}{lr}
\text { Sales revenues } & \$ 500,000 \
\text { Long-term capital gains } & 14,000 \
\text { Short-term capital losses } & (10,000) \
\text { Trade and business expenses } & (200,000) \
\text { Limited partnership loss } & (50,000) \
\text { Taxable income } & \$ 254,000
\end{array}$
In addition to his Ferrell Company earnings,Martin has other income of $35,000.Included in the $35,000 is a $10,000 loss from the sale of land held as an investment.Martin's adjusted gross income is:
A)$162,000
B)$167,000
C)$172,000
D)$187,000
E)$192,000

Question

Quizplus · Accepted Answer

Martin's share of Ferrell Company's taxable income is $127,000 ($254,000 / 2). Adding his other income of $35,000 gives $162,000. The $10,000 loss from the sale of land offsets the long-term capital gains, resulting in a net capital gain of $4,000. Therefore, Martin's adjusted gross income is $172,000 ($162,000 + $4,000 + $6,000 from the short-term capital loss adjustment).

Martin and Joe Are Equal Partners in Ferrell Company In Addition to His Ferrell Company Earnings,Martin Has Other Income