Question

Peter, a 25% partner in Gold & Stein Partnership, received a $20,000 guaranteed payment in the...

Peter, a 25% partner in Gold & Stein Partnership, received a $20,000 guaranteed payment in the current year for deductible services rendered to the partnership. Guaranteed payments were not made to any other partner. Gold & Stein's current-year partnership income consisted of:

Net business income before guaranteed payments $80,000
Net long-term capital gains 10,000

What amount of income should Peter report from Gold & Stein Partnership on his current-year tax return?

a. $37,500

b. $27,500

c. $22,500

d. $20,000

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Answer #1

Calculate the amount of income that Peter should report from Gold & Stein Partnership on his current-year tax return as follows:

Partnership income before guaranteed payment to Peter 80,000
Less: Deductible guaranteed payment to Peter 20,000
Partnership's net taxable income 60,000
Peter's share in the partnership's net taxable income (60,000 x 25%) 15,000
Add: Peter's share in the net long-term capital gains (10,000 x 25%) 2,500
Add: Guaranteed payment to Peter 20,000
Amount to be reported by Peter as income from Gold & Stein Partnership 37,500

Therefore, the correct answer is a. $37,500

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