The partnership agreement of the G&P general partnership states that Gary will receive a guaranteed payment of $14,500, 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: (Negative amounts should be indicated by a minus sign.)
Sales revenue $ 85,500
Gain on sale of land (§1231) $ 7,900
Cost of goods sold $ (43,200 )
Depreciation—MACRS $ (16,300 )
Employee wages $ (19,400 )
Cash charitable contributions $ (5,100 )
Municipal bond interest $ 4,800
Other expenses $ (5,200 )
1. How much ordinary income (loss) is allocated to Gary for the year?
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).
3. 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.
4. 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?