Question

Marsha is a 30% partner in the MNO partnership, Niles and Oprah each have a 35% interest in the partnership. The partnership earns $100,000 from ordinary operations before considering a $10,000 guaranteed payment to Marsha. How much income does each partner report from the partnership?

Answer 1

Interest of each partner in the partnership firm is given as:

Marsha 30%

Niles 35%

Oprah 35%

Total = 100%

Here point to be noted is that guaranteed payment is priority payment before any distribution made as per their interest ratio.

Income from ordinary operations = 100,000

Less: Guaranteed payment to Marsha = (10,000)

Balance income to be shared in ratio of interest = 90,000

So Marsha will get 10000 + 90000 x 30/100 = 37,000

Niles will get 90000 x 35/100 = 31,500

Oprah will get 90000 x 35/100 = 31,500

Total amount distributed = 100,000