Martin and Joe are equal partners in Ferrell Company.For the current year,Ferrell Company reports the following items of income and expense:
$\begin{array}{lr}
\text { Sales revenues } & \$ 500,000 \
\text { Long-term capital gains } & 14,000 \
\text { Short-term capital losses } & (10,000) \
\text { Trade and business expenses } & (200,000) \
\text { Limited partnership loss } & \underline { (50,000) }\
\text { Taxable income } & \underline {\$ 254,000} \
\end{array}$
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

Martin and Joe are equal partners in Ferrell Company.For the current year,Ferrell Company reports the following items of income and expense:
$\begin{array}{lr}
\text { Sales revenues } & \$ 500,000 \
\text { Long-term capital gains } & 14,000 \
\text { Short-term capital losses } & (10,000) \
\text { Trade and business expenses } & (200,000) \
\text { Limited partnership loss } & \underline { (50,000) }\
\text { Taxable income } &  \underline {\$ 254,000} \
\end{array}$
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

Quizplus · Accepted Answer

Martin's share of Ferrell Company's taxable income is $127,000 ($254,000 / 2). His other income is $35,000, but he has a $10,000 capital loss, which offsets the $14,000 capital gain from Ferrell Company, resulting in a net capital gain of $4,000. Therefore, Martin's adjusted gross income is $127,000 + $35,000 - $10,000 + $4,000 = $172,000.

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