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Profit Sharing Income 

Profit sharing is a pay mechanism that ties a business's performance to its employee's pay. It refers to payments made to individuals in proportion to the business's earnings. Policy indicates S corporations, general and limited liability partnerships, or limited liability companies might pay a profit share. 

This income appears on the client's tax return. You classify this type of income as unearned income or self-employment based on whether the client actively participates in the business, so you must determine if the client is actively participating in the business.

Review the business's tax return and the individual's tax return to determine what income the client receives and how much to count.

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