Under a partnership agreement Sarah is to receive 25% of the partnerships income

Question

Under a partnership agreement Sarah is to receive 25% of the partnerships income but not less than 12000 The partnerships net income for this year was 32000 What amount can the partnership deduct as a guaranteed payment and what amount of income is Sarah required to report on her individual tax return Under a partnership agreement Sarah is to receive 25% of the partnerships income but not less than 12000 The partnerships net income for this year was 32000 What amount can the partnership deduct as a guaranteed payment and what amount of income is Sarah required to report on her individual tax return

Explanation / Answer

sarah is to receive 25% of income i.e = 32000*0.25 = 8000
but it should not be less than 12000.
so guaranteed payment in this case is = 12000 - 8000 = 4000

sarah will report both guraantee payment and other distributive payment i.e = 12000

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