[shiggity80]

Just finished Becker 2011 REG Final Exam #2 and going over the results.

On simulation #2, it’s asking to list item amounts as either under “Ordinary Income” (reported on Form 1065) or “Separately Stated Item” (reported on Sch. K of 1065).

The one I’m confused about is with regards to Partner Guaranteed Payments. The answer says it’s listed under both Ordinary Income and Separately Stated Item as a -$75,000.

I get why it would be -$75,000 on the Ordinary Payment column, but why is it also -$75,000 on the separately stated item column? If it’s separately stated, it’s going on the K-1 schedule which is the partner’s share of income, so shouldn’t it be POSITIVE $75,000?

Thanks for any help!

FAR: 87
AUD: 86
BEC: 86
REG: 84! Officially Done!

[shiggity80]

Ok, I think I understand it now.

Partner Guaranteed Payments are taken out to get to Net Business income/loss. That income/loss is also found on K-1 schedule. Then, a few lines down (line 4) is a line for Guaranteed Payments, which you enter back in the guaranteed payment that was taken out earlier.

But for the simulation #2, we're just looking at net ordinary income so it will be a negative $75,000.

FAR: 87
AUD: 86
BEC: 86
REG: 84! Officially Done!

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