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What is the amount of guaranteed payments

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Question - Tax Drill - Guaranteed Payments

During 2019, the Tastee Partnership reported income before guaranteed payments of $92,000. Stella owns a 90% profits interest and works 1,600 hours per year in the business. Euclid owns a 10% profits interest and performs no services for the partnership during the year. For services performed in 2019, Stella receives a "salary" of $6,000 per month. Euclid withdrew $10,000 from the partnership during the year.

Required -

a. What is the amount of guaranteed payments made by the partnership during 2019?

b. How much is the partnership's ordinary income after any deduction for guaranteed payments?

c. For 2019, how much income will Stella and Euclid report?

Reference no: EM132515063

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