No. However, in many circumstances it may be possible to convert the guaranteed payment to a priority distribution of profits subject to a cap. For example, assume a partner is entitled to receive a guaranteed payment of $200,000. Alternatively, for instance, the partnership agreement could provide that the partner be allocated annually the first $200,000 of partnership income and receive a corresponding draw against such income, subject to a repayment obligation if the partnership’s profits for that year are less than $200,000 (with a possible “make-up” in subsequent years). While such an arrangement is not free from the risk of the IRS asserting that the arrangement is a disguised fee, many tax professional are comfortable that the amount received may be considered an allocation of partnership income eligible for a §199A deduction.
Q. Is an individual partner entitled to a §199A deduction with respect to a guaranteed payment for services?
A.