Alex, Benny, and Carlos formed ABC Home Repairs, LLC They made no elections so the LLC will default to filing their return as a partnership. They agree that Carlos will manage the business operations and receive a guaranteed payment of $ Carlos\'s share of the income this year was $ How will the guaranteed payment impact the partnership and the partners when reporting for tax filing purposes?

The partnership will deduct as a business expense the $ but only Alex and Benny\'s share of income will be reduced for the amount of the payment to Carlos.

The partnership will deduct the $ as a business expense before calculating the amount of the partnership\'s ordinary income. Alex, Benny, and Carlos\'s share of income will each be apportioned from that reduced amount of income.

The partnership will deduct the $ as a business expense and Carlos\'s share of ordinary income will be reduced by the amount of the guaranteed payment.

The partnership will not be able to deduct the guaranteed payment as a business expense if the partnership does not have ordinary income greater than $ but Carlos will still receive the payment.