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    PracticeCPA®CPA REG Practice Exam 5Question 71
    Hard1 markMultiple Choice
    Area V: Entity TaxationREGTaxationEntities

    CPA · Question 71 · Area V: Entity Taxation

    A partner in a partnership receives a guaranteed payment of $10,000 for services rendered. The partnership has $50,000 of ordinary income before the guaranteed payment. The partner has a 50% profit interest. What is the partner's total income from the partnership?

    Answer options:

    A.

    $35,000

    B.

    $25,000

    C.

    $30,000

    D.

    $60,000

    How to approach this question

    Step 1: Deduct GP from Partnership Income. Step 2: Allocate remaining income. Step 3: Add GP back to Partner's total.

    Full Answer

    C.$30,000✓ Correct
    C
    The guaranteed payment is deductible by the partnership. Net Ordinary Income = $50,000 - $10,000 = $40,000. Partner's 50% share = $20,000. Partner reports $20,000 ordinary income + $10,000 guaranteed payment = $30,000 total.

    Common mistakes

    Forgetting to deduct the GP from the partnership income before applying the percentage.
    Question 70All questionsQuestion 72

    Practice the full CPA REG Practice Exam 5

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