Actually for the partnership - Guaranteed payments are treated differently compare to partnership distributions.
In simple words - Guaranteed payments are payments for services partners provided and not related to the partnership interest allocation.
On K1 - that amount is reported in box 4 - not box 1.
Guaranteed payments are those made by a partnership to a partner that are determined without regard to the partnership s income. A partnership treats guaranteed payments for services, or for the use of capital, as if they were made to a person who is not a partner. This treatment is for purposes of determining gross income and deductible business expenses only.
For other tax purposes, guaranteed payments are treated as a partner s distributive share of ordinary income. Guaranteed payments are not subject to income tax withholding.
The partnership generally deducts guaranteed payments on line 10 of Form 1065 as a business expense. They are also listed on Schedules K and K-1 of the partnership return. The individual partner reports guaranteed payments on Schedule E (Form 1040) as ordinary income, along with his or her distributive share of the partnership s other ordinary income.
Depending on circumstances - it is possible that all or some of guaranteed payments are NOT reported on line 10.
For instance - payments and credits that should be capitalized. For example, although payments or credits to a partner for services rendered in syndicating a partnership may be guaranteed payments, they aren't deductible on line 10. They are capital expenditures.
Another possible situation when guaranteed payments are included as a cost of labor and reported on 1125A line 3.
there is nothing to prohibit such treatment - but that option is not mentioned in instructions.
While there is no any tax benefits for including a part of guaranteed payments into COGS - You still may do that.