Question 1

A partnership makes a guaranteed payment of $50,000 to a partner for services. The partnership has $100,000 of ordinary income before the guaranteed payment. What is the partnership's ordinary income after the payment and the partner's total income inclusion (assuming 50% share of profits)?

Accepted Answer

1. Deduct Guaranteed Payment from Partnership Income. 2. Allocate remaining income to partners. 3. Partner Income = Guaranteed Payment + Share of Remaining Income.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Forgetting to deduct the GP at partnership level; forgetting to add the distributive share to the GP for the partner.

A partnership makes a guaranteed payment of $50,000 to a partner for services. The partnership has $100,000 of ordinary income before the guaranteed payment. What is the partnership's ordinary income after the payment and the partner's total income inclusion (assuming 50% share of profits)?

How to approach this question

Full Answer

Common mistakes

Practice the full CPA TCP Practice Exam 5

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