Par. 3. Section 1.707-1 is amended by adding a sentence at the end of paragraph (a) and revising paragraph (c) Example 2 to read as follows.
(a) * * * For arrangements pursuant to which a purported partner performs services for a partnership and the partner receives a related direct or indirect allocation and distribution from the partnership, see § 1.707-2 to determine whether the arrangement should be treated as a disguised payment for services.
(c) * * *
Example 2. Partner C in the CD partnership is to receive 30 percent of partnership income, 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). Of this amount, $10,000 is a guaranteed payment to C. The $10,000 guaranteed payment reduces the partnership's net income to $50,000 of which C receives $8,000 as C's distributive share.
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