Partnership Basis

[Snaggletooth]

Does it include guaranteed payments? I should already know this.

A partner has $10,000 in his proportionate share of profits, but this does not include $15,000 in guaranteed payments. For purposes of calculating his basis, is his "share" $10,000 or $25,000?

The best specific address I could find is in TTB, Small Business Page SB4-8. Under Basis Increases, the language includes "The partner's distributive share of taxable and non-taxable partnership income." The way it reads, he had a distributable share of the income when he received the guaranteed payment. However, at that point, the partnership was able to deduct that as an expense, meaning it was removed from the distributable share ultimately.

[KJ Judd]

Guaranteed payments do not provide basis. I encountered this early this tax season.

[Snaggletooth]

A "Wash"

Mr. Judd, although I don't know the answer, my gut feeling is that they actually meet the definition of income, but also meet the definition of withdrawals. In short, they cancel each other out. So your non-treatment as you discuss would be correct, bottom line.

[S T]

Profits

Wouldn't his proportionate share of profits/losses reflect that partnerhip % of his guaranteed payments. Guaranteed payments are a deduction overall and then flows through to the ordinary income/loss line, and then that partner on his K-1 should also have an entry on the guaranteed payment line of the K-1

I agree with KJ guaranteed payments won't affect basis, as there has already been a basis reflection in the ordinary income/loss.

Sandy

[JG EA]

I also agree. It is like wages on S-Corp. Not part of basis.