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Question: question 1 partnership income distribution to partners john and...

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QUESTION 1 - PARTNERSHIP INCOME. DISTRIBUTION TO PARTNERS

John and Jenny are business partners in a bakery in Sydney and share profits and losses 60/40. The partnership made a tax loss of $40,000 in the year ended 30 June 2018.

However for the year ending 30 June 2019 the partnership income was $40,000 after paying salaries and other expenses as detailed below:

  1. Salaries paid for managing the business to John was $100,000 and to Jenny $60,000

  2. Interest paid on a loan provided by John by way of an advance to the partnership $15,000

  3. Salary paid to Jenny’s husband for secretarial services $90,000. It is estimated that a wage of $60,000 of this is

    normal based on commercial rates.

  4. $25,000 in superannuation contributions was paid to John’s superannuation fund during the year.

REQUIRED:
PART 1
Calculate the net partnership income for the year ending 30 June 2019 under Div 5 ITAA36. Use the following 3 column approach to provide your answer

PART 2:
Calculate the net income or net loss to be distributed to each partner

Issue

Law / Reasons

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Amount

In your response, ensure you state the appropriate legislation tax rulings or common law cases to support your answer and calculations.

 

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