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Alex, Ellen and Nicolas are equal partners in a local restaurant. The restaurant reports the following items for the current year: Business revenue $770,000 Business expenses 470,000 Investment expenses 150,000 Each partner receives a Schedule K-1 with one-third of the preceding items reported to him/her. How must each individual report these results on his/her Form 1040? $100,000 income on Schedule E; $50,000 investment expense on Schedule A $257,667 income on Schedule E; $50,000 investment expense on Schedule A $300,000 income on Schedule E; $50,000 investment expense on Schedule A $300,000 income on Schedule E; $150,000 investment expense on Schedule A

Respuesta :

Answer:

$100,000 income on Schedule E; $50,000 investment expense on Schedule A

Explanation:

According to the Internal revenue service, the investment expense that is incurred would be eligible for the deduction and this would be added to the miscellaneous itemized deduction in Form 1040 Schedule A.

We assume that the investment expense would be incurred for the investment earning so it would be reported to Schedule A for $50,000 after considering the one-third.

And, the business income is reflected on Schedule A for $100,000 that is computed below:

= (Business revenue - business expense) ÷ given ratio

= ($770,000 - $470,000) ÷ 3

= $300,000 ÷ 3

= $100,000

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