Quite frankly, I am not a tax professional and it may not be correct. However, as I understand proper treatment:
Because it is regular income to the partner, it needs to show up on Schedule K. Because the business should treat it as a capital expense deductible upon sale of the asset, it should not show up on pg. 1. This is the precise problem I am struggling with.
I feel certain that some guaranteed payments for business activity should be capitalized. Pub. 541 addresses organizational costs: "Guaranteed payments made to partners for organizing the partnership or syndicating interests in the partnership are capital expenses. Generally, organizational and syndication expenses are not deductible by the partnership...Organizational expenses and syndication expenses paid to partners must be reported on the partners' Schedules K-1 as guaranteed payments.
