Guaranteed Payments

Guaranteed Payments are payments made from a partnership to a partner regardless of the partnerships profitability. Guaranteed payments are deducted from partnership income in determining the distributive share of partnership gain or loss for the year. Guaranteed payments are a partnerships form of payments to partnership, similar to wages in an corporation. For instance, if a partnership earns $800,000 for the year, with two partners, and each partner receives guaranteed payments of $150,000, the distributive share of partnership profits would be $500,000 ( $800,000 profit - $150,000 to each partner). The partners would receive $400,000 each, $150,000 in guaranteed payments subject to SE tax, and $250,000 of distributive profit, subject to SE tax if both partners are general partners.