[pia ach]

Are guaranteed payments taken into consideration while calculating partner’s basis in partnership interest at the end of the year? I remember it as adding all the incomes and reducing the cash distributions to arrive at the partner’s basis. But in Wiley test bank, i see a question where guaranteed income has not been added…so confused!

Finally done!!! Experience-pending. Ethics- Pending.
Reg 78 / 73/82.
Aud 74/89.
BEC 72 /78.
FAR 74/ 73/ 82.

[pia ach]

Am not able to copy the question..here's the explanation :

Martin’s basis in the partnership is his original contribution of $75,000 less his one-half share of the $18,000 loss. Therefore, his basis is $66,000. The guaranteed payment of $20,000 is already reflected as a deduction in the computation of the partnership’s loss of $18,000, and the receipt of the guaranteed payment must be reported as ordinary income by Martin.

What am i missing? 🙁

Finally done!!! Experience-pending. Ethics- Pending.
Reg 78 / 73/82.
Aud 74/89.
BEC 72 /78.
FAR 74/ 73/ 82.

[Anonymous]

The partnership had $2000 net income before the guaranteed payment. They deducted the guaranteed payment to get to a taxable loss of $18000.

Original Basis 75000

Share of Loss -9000

Ending Basis 66000

[pia ach]

Got it! Thanks @2k2s2k

Finally done!!! Experience-pending. Ethics- Pending.
Reg 78 / 73/82.
Aud 74/89.
BEC 72 /78.
FAR 74/ 73/ 82.

[Sudad]

You don't have to include guarantee payments in the computations of partners' basis. Guarantee payments are like salaries, they are payments to partners for their service. Whether the company has a profit or loss, you still have to deduct the guarantee payments from income to arrive at the net income or loss. Net income or loss is included in the computation of parnters' basis computation along with the distribution to partners (deduction) and contribution of partners (addition) to partnership. I hope this help a little.

DONE!!!

[pia ach]

Thanks @sudad..I hate reg with so many stuff to remember, i am getting all confused.

Finally done!!! Experience-pending. Ethics- Pending.
Reg 78 / 73/82.
Aud 74/89.
BEC 72 /78.
FAR 74/ 73/ 82.

[Author]

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