Ben is a 30% partner in a partnership. The partnership guarantees Ben payments of $25,000 for the year. If the partnership has ordinary income of $15,000 before adjustment for the guaranteed payment, Ben must report

Question

Quizplus · Accepted Answer

Ben must report the guaranteed payment of $25,000 as ordinary income. The partnership's ordinary income of $15,000 is reduced by the $25,000 guaranteed payment, resulting in a partnership loss of $10,000. Ben's share of this loss is 30% of $10,000, which is $3,000. Therefore, Ben reports $25,000 in ordinary income and a partnership loss of $3,000.

Ben Is a 30% Partner in a Partnership