Guaranteed payments made by a partnership to partners for services rendered to the partnership, that are deductible business expenses under the Internal Revenue Code, are:
I.
Deductible expenses on the U.S. Partnership Return of Income, Form 1065, in order to arrive at partnership income (loss).
II.
Included on schedules K-1 to be taxed as ordinary income to the partners.
Choice "B" is correct. Guaranteed payments to partners are deductible on Form 1065, Line 10, to arrive at partnership ordinary income. On Schedule K-1, guaranteed payments are shown as income on Line 5 and flow through as ordinary income.Choices "c", "d", and "a" are incorrect. Each of these does not address both rules correctly.
