Question

Which of the following statements is true regarding the treatment of income for different types of partners?

1) General partner's guaranteed payment is always treated as self-employment income.
2) Limited partner's share of ordinary income is not treated as self-employment income.
3) LLC managing member's share of ordinary business income varies, with some treating it as self-employment income and others not.
4) All of the above

Answer 1

The treatment of income for different types of partners depends on the specific partner's role in the partnership.

Step-by-step explanation:

The correct statement regarding the treatment of income for different types of partners is statement number 4: All of the above.

General partner's guaranteed payment is treated as self-employment income because general partners actively participate in the management and operations of the partnership.

The limited partner's share of ordinary income is not treated as self-employment income because limited partners have a more passive role in the partnership.

LLC managing members' share of ordinary business income can vary depending on the specific structure and operation of the LLC. Some LLCs may treat the managing member's share as self-employment income, while others may not.