Dale’s distributive share of income from the calendar-year
partnership of Dale & Eck was $50,000 in 2012. On December
15, 2012, Dale, who is a cash-basis taxpayer, received a
$27,000 distribution of the partnership’s 2012 income, with the
$23,000 balance paid to Dale in February 2013. In addition, Dale
received a $10,000 interest-free loan from the partnership in
2012. This $10,000 is to be offset against Dale’s share of 2013
partnership income. What total amount of partnership income is
taxable to Dale in 2012?

(c) The requirement is to determine the total amount of
partnership income that is taxable to Dale in 2012. A partnership
functions as a pass-through entity and its items of income and
deduction are passed through to partners on the last day of the
partnership’s taxable year. Income and deduction items pass
through to be reported by partners even though not actually
distributed during the year. Here, Dale is taxed on his $50,000
distributive share of partnership income for 2012, even though
$23,000 was not received until 2013. The $10,000 interest-free
loan does not effect the pass-through of income for 2012, and the
$10,000 offset against Dale’s distributive share of partnership
income for 2013 will not effect the pass-through of that income
in 2013.