What does guaranteed payment mean on the CPA exam?
Guaranteed payment. A payment to a partner for services or the use of capital, determined without regard to partnership income. Treated as made to a non-partner for gross income and business expense purposes only, so it is ordinary income and is not a distributive share.
Defined against Sec. 707(c).
Which CPA exam sections use guaranteed payment?
Guaranteed payment appears in the REG section of the CPA exam.
Related terms
- ordinary income: Income taxed at the regular graduated rates rather than at preferential capital gain rates.
- gross income: All income from whatever source derived, unless the Code specifically excludes it.
- partnership interest: A partner's stake in the partnership itself, distinct from any interest in its underlying assets.
- hot assets: A partnership's unrealized receivables and inventory.
- ordinary loss: A loss deductible against ordinary income without the capital loss limits.
- outside basis: A partner's tax basis in the partnership interest itself.