A partner had the following items reported on a partnership Schedule K-1: $\begin{array}{lr}\text{ Ordinary income (including Section }1245\text{ recapture of }\$5,000\text{ ) }& \$59,000\\ \text{ Dividend income }& 1,500\\ \text{ Guaranteed payment }& 9,000\\ \text{ Section 179 expense }& 26,000\end{array}$ The partner's self-employment income for the year equals:

A) $28,000.
B) $37,000.
C) $42,000.
D) $68,000.

Self-employment income includes ordinary business income and guaranteed payments, but not dividend income or Section 179 expense deductions. Therefore, the partner's self-employment income is $59,000 (ordinary income) + $9,000 (guaranteed payment) = $68,000. However, the Section 1245 recapture of $5,000 is part of the ordinary income, which is not subject to self-employment tax. Thus, the correct self-employment income is $68,000 - $5,000 = $63,000.