Henry has a 30% interest in the HMS Partnership's capital, profits, and losses computed after taking into account his guaranteed payment of $40,000. In the current year, HMS reports ordinary income of $30,000 and capital gains of $60,000 before taking into account Henry's guaranteed payment. What is the amount and character of all income or loss that Henry must report as a result of partnership
activities?
A) $40,000 guaranteed payment (ordinary income), $3,000 ordinary loss, $18,000 capital gain
B) $40,000 guaranteed payment (ordinary income), $15,000 capital gain
C) $40,000 guaranteed payment (ordinary income), $9,000 ordinary income, $6,000 capital gain
D) $13,000 guaranteed payment (ordinary income), $6,001 ordinary income, $38,820 capital gain
A) $40,000 guaranteed payment (ordinary income), $3,000 ordinary loss, $18,000 capital gain
OI = $40,000 guaranteed payment; OL = ($30,000 - $40,000) × 0.30 = ($3,000); capital gains = $60,000 × 0.30 = $18,000.
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