Y is a general partner in the XYZ Partnership. For the current calendar year, Y’s share...
Y is a general partner in the XYZ Partnership. For the current calendar year, Y’s share of profits includes his guaranteed compensation of $55,000 and his share of remaining profits, which is $22,000. What is the proper income tax and payroll tax (F.I.C.A. or self-employment tax) treatment of each of the following to Y for the current calendar year?
Homework Answers
*the guaranteed compensation for $50,000:
The guaranteed compensation will be taxed in hands of Y at personal rate and the partnership firm have to deduct FICA while paying such compensation.
*The remaining income of $22,000.
the remaining income share is not taxable in hands of Y as partnership firm already pays tax on that share at firm rate.no FICA has to be deducted on that share.
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