Yee manages Huang real estate, a partnership in which she is also a partner. She receives 40% of all partnership income before guaranteed payments, but no less than $80,000 per year. In the current year, the partnership reports $400,000 in ordinary income. What is Yee's distributive share and her guaranteed payment?

Question

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Yee's distributive share is 40% of $400,000, which is $160,000. However, her guaranteed payment is no less than $80,000, so her distributive share is capped at $320,000 ($80,000 / 40%). Therefore, her distributive share is $320,000 and her guaranteed payment is $80,000.

Yee Manages Huang Real Estate, a Partnership in Which She