Molly is a partner in an engineering firm. She is active in the business and serves as the partnership's chief accounting officer. She receives a guaranteed payment of $50,000 each year without regard to the firm's profits or losses. Assuming the payment is reported correctly on her Schedule K-1 (Form 1065), how should Molly report this income on her tax return?

Self-employment income, reported on Schedule C, Profit or Loss from Business (Sole Proprietorship). Passive income, reported on Schedule E, Supplemental Income and Loss. Nonpassive income, reported on Schedule E, Supplemental Income and Loss. Wages, salaries, tips, etc. reported directly on Form 1040.