How much ordinary income must Erica include on her tax return when her distributive share is 10% of the partnership's $50,000 income?

To determine how much ordinary income Erica must include on her tax return, it's essential to understand how partnership income is allocated among its partners. In this case, Erica has a 10% interest in the partnership, which earned a total income of $50,000.

To calculate her distributive share, you take 10% of the $50,000 income. This results in:

10% of $50,000 = $5,000.

Since partnerships are pass-through entities, the income is reported on the partners' tax returns, even if the income is not distributed in cash. Therefore, Erica must report the entire amount of her distributive share, which is $5,000, as ordinary income on her tax return.

The understanding of how partnership income is treated is crucial, as it emphasizes that even though a partner may not receive cash, they are still liable for reporting their share of the income. This means that the correct amount of ordinary income that Erica must include on her tax return is $5,000.