Peters has a one-third interest in the Spano Partnership.
During 2012, Peters received a $16,000 guaranteed payment,
which was deductible by the partnership, for services rendered to
Spano. Spano reported a 2012 operating loss of $70,000 before
the guaranteed payment. What is (are) the net effect(s) of the
I. The guaranteed payment decreases Peters’ tax basis in
Spano by $16,000.
II. The guaranteed payment increases Peters’ ordinary income