Molly is a 30% partner in the MAP Partnership.During the current tax year,the partnership reported ordinary income of $200,000 before payment of guaranteed payments and distributions to partners.The partnership made an ordinary cash distribution of $20,000 to Molly,and paid guaranteed payments to partners Molly,Amber,and Pat of $20,000 each ($60,000 total).How much will Molly's adjusted gross income increase as a result of the above items?

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Molly's share of the partnership's ordinary income is $60,000 ($200,000 x 30%). The partnership's guaranteed payments of $60,000 ($20,000 to each of the three partners) are deductible by the partnership and included in each partner's gross income. Therefore, Molly's gross income from the partnership is $120,000 ($60,000 of ordinary income + $20,000 of guaranteed payment). Her cash distribution of $20,000 is not included in her gross income because it represents a return of capital. Thus, Molly's adjusted gross income will increase by $62,000 ($120,000 - $20,000 for the guaranteed payment).

Molly Is a 30% Partner in the MAP Partnership