Question

a guaranteed payment is a payment made to a general partner
a. from the profits if the partnership not subject to self employment
b. from the profits if the partnership subject to self employment
c. without regard to the income of the partnership not subject to self employment tax
without regard to the income of the partnership subject to self employment

Answer 1

Ans: D. without regard to the income of the partnership subject to self employment tax.

guaranteed payments to partner are payments meant to compensate a partner for services rendered or use of capital. Usually they are equilent of salary for partner.these kind of payments eliminate the risk of a partner making personal contributions of time or property and then never getting compensated if the partnership does not prove to be successful.these payments are made without regard to the partnership profitability.in fact such payments constitute a net loss for the partnership.in addition these payments can create special and unexpected tax implications if they are not handled correctly.income from a guaranteed payment to a partner may be subject to self employment tax ,though that depends on the terms of payment.