The partnership agreement of the G&P general partnership states that Gary will receive a guaranteed payment of $13,000, 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

$

70,000

Gain on sale of land (1231)

$

8,000

Cost of goods sold

$

(38,000

)

DepreciationMACRS

$

(9,000

)

Employee wages

$

(14,000

)

Cash charitable contributions

$

(3,000

)

Municipal bond interest

$

2,000

Other expenses

$

(2,000

)

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

Ordinary income (loss)

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).

Description	Total Amount	45% Allocated to Gary
Separately Stated on Schedule k-1:

b. Compute Garys 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.

Self-Employment Income (Loss)

c. What do you believe Garys 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?

Self-Employment Income (Loss)