Guaranteed Payments: Pam and Susan own the PS Partnership. Pam takes care of dai
ID: 2425758 • Letter: G
Question
Guaranteed Payments: Pam and Susan own the PS Partnership. Pam takes care of daily operations and receives a guaranteed payment for her efforts. What amount and character of income will each partner report in each of the following independent situations?
A) The PS Partnership reports a 10,000 long term capital gain and no ordinary income. Pam receives a 40,000 guaranteed payment plus a 30% distributive share of all partnership income after deducting guaranteed payment.
B) The PS Partnership reports 80,000 of ordinary income, before considering any guaranteed payment, and a 60,000 Sec. 1231 gain. Pam receives a 35,000 guaranteed payment plus 20% distributive share of all partnership income after deducting the guaranteed payment.
C) The PS Partnership reports 120,000 of ordinary income before considering any guaranteed payment. Pam receives 40% partnership income but no less than 60,000.
Explanation / Answer
Situation A PS Partnership Income Business Income - (+) Capital gain 10,000 Total Income 10,000 Partners Income Particulars Pam Susan Salary 40,000 - Business Income - Share of profit 3,000 7,000 Total 43,000 7,000 Situation B PS Partnership Income Ordinary Income 80,000 (-) Guranted Payment to Pam -35,000 Business Income 45,000 Capital gain 60,000 Total Income 1,05,000 Partners Income Particulars Pam Susan Salary 35,000 - Business Income - Share of profit 21,000 84,000 Total 56,000 84,000 Situation C PS Partnership Income Ordinary Income 1,20,000 (-) Guranted Payment to Pam -20,000 Total Income 1,00,000 Partners Income Particulars Pam Susan Salary 20,000 - Business Income - Share of profit 40,000 60,000 Total 60,000 60,000
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