Phil and Bill each own a 50 percent interest in P&B Interests.P&B Interests has ordinary income for the year of $35,000 before guaranteed payments to Phil.If Phil receives guaranteed payments of $20,000 during the tax year, what is the total income or loss that should be reported by Bill from the partnership for this tax year?

Question

Quizplus · Accepted Answer

Since Phil received guaranteed payments of $20,000, his share of the ordinary income from the partnership would be reduced by that amount, leaving only $15,000 to be split between Phil and Bill. As such, Bill's share of the income would be $7,500 (50% of $15,000).

Phil and Bill Each Own a 50 Percent Interest in P&B