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Guaranteed payments to partners are considered a form of compensation for services rendered or for the use of capital, and they are treated as ordinary income for tax purposes. This means that the recipient partner must include these payments in their taxable income.

Since guaranteed payments are made to a partner in exchange for their services, they are also subject to self-employment tax. This tax is applied to net earnings from self-employment, including guaranteed payments, which means they increase the overall self-employment tax liability for the partner receiving them.

Understanding the treatment of guaranteed payments is crucial for determining a partner's tax obligations, especially when it comes to calculating net earnings subject to self-employment tax. This understanding helps ensure accurate tax filings and aids in financial planning for partners involved in partnerships.