Question

With regard to fringe benefits offered to partners, which of the following is correct? a. partnership-paid insurance premiums provided as compensation for services rendered to the partnership are generally treated as Section 707 (c) guaranteed payments to the recipient partner, b. Partners are treated the same as garden variety employees for all fringe benefit purposes, c. All partnership-paid fringe benefits are federal income tax free for partners, d. All partnership-paid fringe benefits are fully taxable for partners

Answer 1

Solution: The correct option is “a” i.e partnership-paid insurance premiums provided as compensation for services rendered to the partnership are generally treated as Section 707 (c) guaranteed payments to the recipient partner

The cost of providing the insurance premiums as fringes to a partner in exchange for services are treated as deductible guaranteed payments made by the entity and are treated as the taxable income from guaranteed payments for the recipient( i.e the partner). The insurance premium paid by the partnership is for accident and with respect to the health insurance coverage for the partners, their spouses, and dependents.