How to report Guaranteed Payment Received

[amyonghwee]

I have a LLC taxed as a partnership (LLC - A).   Among the partners, it has a management LLC (LLC - B) , taxed as a C-corp. Every month, LLC-A  will pay LLC-B a fixed sum of monies for guaranteed payment.  How should I report this in LLC-B tax returns ? Income ??

[Rick19744]

Yes.  This should be reported as ordinary income on the C corporation 1120.

[amyonghwee]

Thanks for reply!

LLC-A has 3 partners (partnerA 40%, partnerB 25%, LLC-B 35%).

In 2023, LLC-A paid a total of $10k to LLC-B for guaranteed payment. 

Schedule K-1 generated by TT  for LLC-B listed 

Line 4a Guaranteed payments for services  $3,500.  (seems to be linked to LLC-B ownership in LLC-A)

I feel this should be reflecting $10,00 instead for LLC-B schedule K-1.

Is this the right expectation ?

BTW the operating agreement/minutes of LLC-A reflects this fixed monthly guaranteed payment to LLC-B only...  and never to partnerA and partnerB.

Pls advise.

[Rick19744]

I am not in a Windows environment to review TT input, however, I believe you need to go into the member section and specifically allocate the guaranteed payment to LLC-B.

Not doing this, TT will allocate based on ownership %; which is what appears to be happening.

[amyonghwee · Accepted solution]

The member section does not allow specific allocation for guaranteed payment.

Found the answer and sharing with the community.

Under Deductions, Compensation and Benefits section, there is a Guaranteed payments sub-section.

There is an Allocate by Amount button. Click on this and follow the rest of the instructions to allocate the guaranteed payment to a specific partner

[Rick19744]

Thanks.  This is helpful to understand since I am not in a Windows environment and is a common question.