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Anonymous asked in Business & FinanceTaxesUnited States · 1 year ago

are cash distributions to partners subtracted when calculating partnership ordinary income?

if a general partner gets a $10,000 cash distribution, would that expense be included in the calculation of partnership ordinary income?

3 Answers

  • Eva
    Lv 7
    1 year ago

    A distribution to a partner is not an expense on a tax return unless is it considered a guaranteed payment, similar to a salary except there is no tax withholding on it. This often happens when 1 or 2 partners are the working partners and the others are simply investment partners. The working partners receive guaranteed payments and then the remainder (profit) is split between all the partners.

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  • 1 year ago

    A cash payout is not income but the partner's distributive share of profits are.

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  • 1 year ago

    "Guaranteed Payments" are deductible by the partnership. They then flow through the K1 to the partner and are taxable on the partner's return.

    Normal cash distributions are not deductible by the partnership nor are they taxable to the partner. The do, however, reduce the partner's basis.

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