Question

Maria and Javier are the equal partners in MarJa, a partnership that is a qualfied trade...

Maria and Javier are the equal partners in MarJa, a partnership that is a qualfied trade or business. In the current year, MarJa generated $373,000 of ordinary income after reporting $447,600 in guaranteed payments to Maria and Javier for their services to MarJa ($223,800 each).

a. What is Maria's and Javier's qualified business income?

b. What is Maria's and Javier's qualified business income if MarJa had incurred $522,200 of ordinary income after reporting $223,800 in guaranteed payments to Maria and Javier ($111,900 each)?

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Answer #1

a)

Maria and Javier's qualified business income is the total of $373,000. The amount of guranteed payments, i.e., $447,600 is not included in the qualified business income. Therefore, their qualified business income is $373,000 and as they are equal partners, $186,500 each.

b)

If Maria and Javier's qualified business income is the total of $447,600. The amount of guranteed payments, i.e., $223,800 is not included in the qualified business income. Therefore, their qualified business income is $522,200 and then they are equal partners, $261100 each.

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