Statement of Advice 1 Partnership net income & distribution
Your client Jack and Dustin at J & D Partners have attended your office to have their 2022-year tax return prepared.
Jack and Dustin are equal partners in J & D Partners partnership. Both have contributed equal amounts of capital ($50,000 each). Jack is a silent partner while Dustin spends most of the time working in the partnership business.
In addition to the annual salary to Dustin, the partnership agreement provides the following:
Jack and Dustin will each receive interest at the rate of 15% per annum on their capital contribution.
Dustin will receive a salary of $35,000 per annum for the management of the business, and $4,000 per annum will be paid by the business into a superannuation fund for Jack.
All residual profits and losses will be shared equally between the Jack and Dustin.
The bookkeeper has provided the following information in relation to the partnership for the 2021/22
tax year:
Sales
Interest on capital constitutions Jack and Dustin Cost of Sales
Dustins Salary
Jacks superannuation
Lease of car
Other operating expenses
Capital gain
Other Information
$500,000 $15,000 $200,000 $35,000 $4,000 $9,000 $60,000 $120,000
1) Capital gain on land: the land was purchased 6 years ago for $80,000 and sold for $200,000
2) A car was leased for the business and this car has been used solely by Dustin, who has used the car 90% for business and 10% for private use.
Required
Advise Jack and Dustin what is the ITAA36 s90 net income of the partnership and each partners taxable income for 2022. You must provide all workings (details) to determine the partnership net income as well as individual partners assessable income.
