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)
• Riley and Layla will each pay personal income tax on half of the partnership's total earnings regardless of how the earnings are distributed.
• The partnership itself will pay the tax on total earnings before the earnings are distributed to Riley and Layla.
• 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 each portion of earnings after they have been distributed to Riley and Layla.