Final answer:
Guaranteed payments to partners in a partnership are considered ordinary income, akin to a salary, and they are subject to self-employment tax.
Step-by-step explanation:
Guaranteed payments are treated as ordinary income by the partners that receive them. These payments represent a mechanism for partners to receive a steady income from the partnership regardless of the partnership's overall profitability. Unlike distribution of profits, which may vary year by year based on the success of the business, guaranteed payments are fixed amounts paid to partners and are typically for services rendered or for the use of capital. For tax purposes, the payments are considered akin to a salary for an employee and are subject to self-employment tax. The partners receiving guaranteed payments must report them as income on their individual tax returns, and the partnership can deduct these payments as a business expense.