Have a client in a partnership.  Tax preparer of the partnership wants to issue 1099s to each partner for their share of services performed.  I say they have to either modify their income split, which per the 761 regulation they can do or treat payments as guaranteed payments.  Guaranteed payments (GPs) are not optimal anymore with the QBI calculation saying that GPs are not included in the QBI calculation.  My suggestion is to modify the partnership income split per the 761 regulation. 

Per Code section 707(a), the way I read it is that a partner can only be issued a 1099 when they are performing services as a non partner, i.e. they are NOT performing services that are part of their operating agreement.  Example would be a partner of an engineering entity having a side gig of accounting service paid to the partnership.  That is partner is working in a capacity OTHER than a partner based on what I read in the code.

I have not been able to find any support for issuing a 1099. Is there any information in the code or regulations that supports issuing a 1099-NEC to the partners when a partner engages in a transaction of the partnership (engineering services) that IS in his/her capacity as a member of the partnership?