What amount of EF Partnership net ordinary business income

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Question - Emanuel contributed $10,000 in exchange for a 40% profit (and loss) interest in EF Partnership. Fabio contributed land (FMV = $10,000; AB = $5,000) in exchange for a 60% profit (and loss) interest in EF Partnership. The partnership agreement specifies that the first $5,000 in profits (ever, not each year) will be allocated to Emanuel.

This year (first year of operation), EF Partnership generated income of $100,000 and deductions of $92,000 (net ordinary business income or profit of $8,000). There were no separately stated items. $1,000 was distributed to Emanuel this year; no distribution was made to Fabio.

What amount of EF Partnership's net ordinary business income will be allocated to Emanuel this year (i.e. for tax purposes, what amount of EF Partnership's ordinary business income will Emanuel report on his individual tax return)?

Reference no: EM133032329

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