DIP LLC Reports Ordinary Income (Before Guaranteed Payments) of $120,000

DIP LLC reports ordinary income (before guaranteed payments) of $120,000, rent expense of $40,000, and interest income of $4,000 for the year. In addition, DIP paid guaranteed payments of $20,000 to partner Percy. If Percy owns a 40% capital and profits interest, how much income will he report for the year and what is its character?

A) $24,000 ordinary income.
B) $24,000 ordinary income, $1,600 interest income, $20,000 guaranteed payment.
C) $25,600 ordinary income, $8,000 guaranteed payment
D) $32,000 ordinary income, $1,600 interest income.
E) $32,000 ordinary income, $1,600 interest income, $20,000 guaranteed payment.

Correct Answer:

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