Nicholas, a 1/2 partner with a basis in the interest of $80,000 at the beginning of the year, received a guaranteed payment in the current year of $50,000. Partnership income before consideration of the guaranteed payment was $20,000.

1. Nicholas reports $75,000 as ordinary income.
2. Nicholas reports $60,000 as ordinary income.
3. Nicholas reports a $15,000 ordinary loss from partnership operations, and the $50,000 guaranteed payment as ordinary income.
4. Nicholas reports a $20,000 ordinary loss from partnership operations, and the $50,000 guaranteed payment as ordinary income.