Donald owns a 45% interest in a partnership that earned $130,000 in the current year. He also owns 45% of the stock in a C corporation that earned $130,000 during the year. Donald received $20,000 in distributions from each of the two entities during the year. With respect to this information, Donald must report $78,500 of income on his individual income tax return for the year.

Question

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Donald's distributive share of partnership income is $58,500 (45% of $130,000), and his dividend income from the C corporation is $20,000. Therefore, he must report $78,500 of income on his individual income tax return for the year.

Donald Owns a 45% Interest in a Partnership That Earned