CPA Study Group
MY query is the Guaranteed payments are salaries to the partner and deducted from the partnership ordinary income and therefore Partnership Ordinary Income should by 200000-60000=140000
Further, Charitable contributions are shown as a separate stated items on the Schedule k-1 and therefore should not be include in the ordinary income.
Therefore partners share of income should be (140000*40%)+(60000)=56000+60000= 116,000
From the question it states that “the total ($200,000) included the guaranteed salary of $60,000 and the charitable contribution to the local church of $12,000” Therefore you would not subtract the $60,000 guaranteed salary out of the $200,000 as it was already removed and additionally you would add back the charitable contribution that was subtracted, as it is assessed after Adjusted Gross Income (from “AGI” adjustment).
That being said –
It should be (200,000 + 12,000 charity contribution)*40% = 84,800 + 60,000 Guaranteed payment