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)
Depreciation - MACRS........................................... ($9,000)
Employee wages.................................................. ($14,000)
Cash charitable contributions.................................... ($3,000)
Municipal bond interest............................................. $2,000
Other expenses..................................................... ($2,000)
a. Compute Gary's share of ordinary income (loss) and 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?