Nicholas, a one-third partner, received a guaranteed payment in the current year of $50,000. Partnership income before consideration of the guaranteed payment was $20,000. Assuming that no loss limitation rules apply, Nicholas reports a $10,000 ordinary loss from partnership operations and the $50,000 guaranteed payment as ordinary income.

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The partnership income before the guaranteed payment is $20,000. After the $50,000 guaranteed payment to Nicholas, the partnership has a $30,000 loss. Nicholas's share of this loss is one-third, which is $10,000. He reports this $10,000 loss and the $50,000 guaranteed payment as ordinary income.

Nicholas, a One-Third Partner, Received a Guaranteed Payment in the Current