Question

Under a partnership agreement, Tammy Is to receive 25% of the partnership income, but not less than $12,000. The partnership’s net income for this year was $32,000. What amount can the partnership deduct as a guaranteed payment, and what amount of income is Tammy required to report on her individual tax return?

(1) Partnership four thousand dollars and Sarah $12,000.

(2) Partnership four thousand dollars and Sarah $20,000.

(3) Partnership $12,000 and Sarah $8,000.

(4) partnership $12,000 and Sarah $20,000.

Answer 1

Under a partnership agreement, tammy is to receive 25% of the partnership income, but not less than $12000.

Net income of partnership is $32000

Share of tammy in partnership is 25%

Tammy share without regard to the minimum guarantee ($32000*25%) is $8000

The guaranteed payment that can be deducted by partnership is $4000 ($12000-$8000)

Amount of income is tammy required to report on her individual tax return. $12000

1. partnership four thousand dollars and sarah $12000