Guaranteed payments have no effect on the basis of a partner's interest in the partnership.

Question

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Guaranteed payments are payments made by a partnership to a partner for services rendered or for the use of capital. These payments are considered a deductible expense for the partnership, and they are taxable income for the partner who receives them. However, guaranteed payments do not affect the partner's basis in the partnership. Basis is the amount of a partner's investment in the partnership, and it is important for determining the partner's share of profits and losses, as well as for tax purposes.

Guaranteed Payments Have No Effect on the Basis of a Partner's