[Anonymous]

Does guaranteed payment to a partner increase the partner’s basis? I think so, because it’s treated as ordinary income to the partner. Am i correct? thanks.

[jstay]

it will decrease it.

think about it for a second: i have a basis of 20,000 in ABC partnership. ABC guarantees me a payment of 5,000 at the end of the year regardless of profit. That 5,000 will decrease my basis to 15,000

[jstay]

and yes it is treated as ordinary income

[Anonymous]

i don't think it is, it's like a salary

[fsugirl2005]

I believe what Anjanji said is true. Guaranteed payments are like salaries. It is treated like income on the partners' individual tax returns.

REG - 78
FAR - 79
AUD - 76
BEC - 75

I have been on this journey off and on for over 10 years. I think it's about time that I wrap this up.

AUD - 10/21/16 (75----07/2010 expired)
FAR - 10/28/16
BEC - 11/2016
REG - 01/2017

Using Gleim CPA Review, Ninja Audio, Ninja Book

[jstay]

clarification, i meant the guaranteed payment is ordinary income TO THE PARTNER receiving it, it is deducted from partnership income to arrive at net income

[Anonymous]

I understand that guaranteed payments is like salary expense to the partnership, it's a deduction to the partnership. and it's income to the partner who receives it. But does guaranteed payments affect partner's basis? I guess no? because the income was included when earned?

anyone?

[Anonymous]

it doesn't affect the basis directly

[taxgeek83]

By my understanding, guaranteed payments do not affect the basis of either the partnership or the partner. They are deducted to arrive at ordinary business income/loss of the partnership, and are ordinary income to the receiving partner. If the guaranteed payments are paid for services rendered to the partnership, they will be subject to SE tax.

The only basis effect is indirect in that the payments reduce the partners' share of ordinary income, which will affect each partner's basis.

[rana_cali]

The guaranteed payments don't affect basis AT ALL. Don't make that mistake on the exam!

AUD: 84
FAR: 75
BEC: 78
REG: 75

DONE-ZO!!!!!!!!

REG: Used Becker 2014 book, NINJA MCQ, Ninja notes, ninja audio
_______________________________
CFE since Oct. 2013.

[Anonymous]

@rana is right and I can imagine this being a good exam question. Guaranteed basis has no effect on a partners basis. It's included as income to the partner. It's like a salary

[jstay]

damn I thought it did. oh well atleast I know for the exam that it doesn't… I hate REG!!!!!!

[Author]

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