Problem 09-61 (LO 09-4) (Algo)

The partnership agreement of the G&P general partnership states that Gary will receive a guaranteed payment of $15,100, and that Gary and Prudence will share the remaining profits or losses in a 45/55 ratio. For year 1, the G&P partnership reports the following results:

Sales revenue	$ 89,500
Gain on sale of land (1231)	7,850
Cost of goods sold	(45,700)
DepreciationMACRS	(14,400)
Employee wages	(20,900)
Cash charitable contributions	(3,700)
Municipal bond interest	3,700
Other expenses	(4,800)

Note: Negative amounts should be indicated by a minus sign.

Problem 09-61 Part a (Algo)

Required:

a-1. How much ordinary income (loss) is allocated to Gary for the year?

a-2. Compute Gary's share of separately stated items to be reported on his year 1 Schedule K-1, including his self-employment income (loss).

b. Compute Gary's share of self-employment income (loss) to be reported on his year 1 Schedule K-1, assuming G&P is a limited partnership and Gary is a limited partner.

c. What do you believe Gary's share of self-employment income (loss) to be reported on his year 1 Schedule K-1 should be, assuming G&P is an LLC and Gary spends 2,000 hours per year working there full-time?