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Riley and Layla are interested in forming a partnership but are concerned about the associated taxes. If the partnership agreement is set such that 80% of earnings go to Riley and 20% go to Layla, which of the following correctly describes how taxes will be paid on the earnings?(1 point)

The partnership itself will pay the tax on each portion of earnings after they have been distributed to Riley and Layla.
The partnership itself will pay the tax on each portion of earnings after they have been distributed to Riley and Layla.

Riley and Layla will each pay personal income tax on half of the partnership's total earnings regardless of how the earnings are distributed.
Riley and Layla will each pay personal income tax on half of the partnership's total earnings regardless of how the earnings are distributed.

Riley and Layla will each pay personal income tax on the portion of earnings that is theirs.
Riley and Layla will each pay personal income tax on the portion of earnings that is theirs.

The partnership itself will pay the tax on total earnings before the earnings are distributed to Riley and Layla.

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otakulover522

Answer:

Riley and Layla will each pay personal income tax on the portion of earnings that is theirs.

Step-by-step explanation:

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Taxes paid in a partnership set up or business which involves more than one person coming together to form an establishment requires that each partner pays its income tax from their earning. Hence, Riley and Layla will each pay personal income tax on portion of their earnings.

Partnership businesses are established and owned by partners who have put resources together.

  • Usually, at the end of each business period, business report such as the annual income report is generated where cost, profit and losses are analysed is generated.

  • This report forms the basis of profit sharing between partners based on each individual's percentage of the partnership share.

  • Personal income taxes is then levied on the amount apportioned to each partner.

Therefore, Riley and Layla will each pay personal income tax on the portion of their earning.

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