<P> Guaranteed payments are those made by a partnership to a partner that are determined without regard to the partnership's income . Compensation for services and capital are guaranteed payments . </P> <P> A partnership treats guaranteed payments for services, or for the use of capital, as if they were made to a person who is not a partner . This treatment is for purposes of determining gross income and deductible business expenses only . </P> <P> For other tax purposes, guaranteed payments are treated as a partner's distributive share of ordinary income . Guaranteed payments are not subject to income tax withholding . </P> <P> In the United States a partnership generally deducts guaranteed payments on line 10 of IRS Form 1065 as business expenses . They are also listed on IRS Schedules K and K - 1 of the partnership return . The individual partner reports guaranteed payments on Schedule E (Form 1040) as ordinary income, along with his distributive share of the partnership's other ordinary income . </P>

In the absence of any provision in the partnership agreement profits and losses are shared