Question

The partnership agreement of the G&P general partnership states that Gary will receive a guaranteed payment of $17,400, and that Gary and Prudence will share the remaining profits or losses in a 45/55 ratio. For year 1, the G&P partnership reports the following results:

Sales revenue	$	90,200
Gain on sale of land (§1231)	$	7,300
Cost of goods sold	$	(46,700	)
Depreciation—MACRS	$	(14,500	)
Employee wages	$	(20,000	)
Cash charitable contributions	$	(5,600	)
Municipal bond interest	$	4,500
Other expenses	$	(3,700	)

Compute Gary's share of separately stated items to be reported on his year 1 Schedule K-1, including his self-employment income (loss). (Round your intermediate computations and final answers to the nearest whole dollar amount.)

Description	Total Amount	Allocated to Gary
Separately Stated Items on Schedule K-1:
Section 1231 gains
Municipal bond interest
Guaranteed payment
Self-employment income

Answer 1

Answer :

Description	Total Amount	Allocated to Gary @45%
Separately Stated Items on Schedule K-1:
Section 1231 gains	$7,300	$3,285
Municipal bond interest	$4,500	$2,025
Guaranteed payment	$17,400	$17,400
Self-employment income	$5,300	$11,955

Total Self-employment income (loss) = Guaranteed payment - Ordinary loss = $17,400 - 12,100 = $5,300

Ordinary business loss allocated to Garry + Guaranteed payment = -$5,445 + $17,400 = $11,955

Note : Allocation of Ordinary income (loss) to Gary for the year :

Particulars	Amount
Sales revenue	$90,200
Less: Cost of Goods sold	($46,700)
Depreciation—MACRS	($14,500)
Employee wages	($20,000)
Other expenses	($3,700)
Guaranteed payment	($17,400)
Ordinary Business Loss	($12,100)
Allocated to Gary = 45% x -$12,100	($5,445)