This year, the Tastee Partnership reported income before guaranteed payments of $92,000. Stella owns a 90% profits interest and works 1,600 hours per year in the business. Euclid owns a 10% profits interest (with a basis of $30,000 at the beginning of the tax year) and performs no services for the partnership during the year. For services performed during the year, Stella receives a "salary" of $6,000 per month. Euclid withdrew $10,000 from the partnership during the year as a normal distribution of cash from Tastee (i.e., not for services).
If required, round your answers to the nearest dollar.
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a. What is the amount of guaranteed payments made by the partnership this year?
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b. How much is the partnership's ordinary income after any permitted deduction for guaranteed payments?
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c. How much income will Stella report?
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