On January 1, 20X9, Mr

On January 1, 20X9, Mr. Blue and Mr. Grey each contributed $100,000 to form the B&G general partnership. Their partnership agreement states that they will each receive a 50% profits and loss interest. The partnership agreement also provides that Mr. Blue will receive an annual $36,000 guaranteed payment.
B&G began business on January 1, 20X9. For its first taxable year, its accounting records contained the following information. $\begin{array}{c}\begin{array}{lll}\text{Gross receipts from sales}\\\text{Cost of sales}\\\text{Gross profit}\\\\\text{Guaranteed payments to Mr. Blue}\\\text{Interest paid on business debt}\\\text{Dividend income}\\\text{Tax exempt interest}\\\text{Operating expenses}\\\text{Depreciation expense}\\\text{Sec. 1231 Gains}\\\end{array}\begin{array}{lll}&&\end{array}\begin{array}{lll} \$ 150,000 \\(\$ 2 2 0 , 0 0 0)\\(\$ 70,000)\\\\(\$36,000)\\(\$ 3,000)\\\$ 500 \\ \$ 1,500 \\(\$138,000)\\ (\$ 9,000) \\ \$ 8,000\\ \end{array}\end{array}$

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The $3,000 of interest was paid on a $60...

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