Partner C in the CD partnership is to receive 30 percent of partnership income, as determined before taking into account any guaranteed payments, but not less than $10,000.
The income of the partnership is $60,000, and C is entitled to $18,000 (30 percent of $60,000) as his distributive share. No part of this amount is a guaranteed payment, because the 30 percent share already exceeds the $10,000 minimum.
However, if the partnership had income of $20,000 instead of $60,000, then $6,000 (30 percent of $20,000) would be partner C’s distributive share, and the remaining $4,000 payable to C to reach the $10,000 minimum would be a guaranteed payment.
The “not less than $10,000” floor is what can turn part of C’s allocation into a guaranteed payment when the percentage share falls short.
With $60,000 of income, C’s 30 percent share is $18,000, which already clears the $10,000 minimum, so none of it is a guaranteed payment.
With $20,000 of income, the 30 percent share is only $6,000, so the $4,000 needed to reach the $10,000 floor is a guaranteed payment.
The percentage is measured on partnership income determined before taking any guaranteed payments into account.
