What type of income is reported by partners on their personal tax returns?

Partners in a partnership typically report their share of the partnership's income on their individual tax returns, which can include various types of income. This encompasses both ordinary income and capital gains income.

Ordinary income consists of the partnership's earnings from its operations, such as sales revenue or the income generated through the provision of services, which gets allocated to each partner based on the partnership agreement. On the other hand, capital gains can arise from the sale of capital assets held by the partnership, such as property or equipment, where the profit from such sales also needs to be reflected on the partners' tax returns.

This dual nature of income is essential because it affects how much tax each partner pays. Partners must be aware of the different types of income allocated to them as it can influence their overall tax liability. Thus, understanding that both ordinary and capital gains income are reported is crucial for proper tax compliance for partners in a partnership.