13.1 REPORTING OF ITEMS FROM PASS-THROUGH ENTITIES Flashcards
WHAT IS A DISREGARDED ENTITY?
A SOLE PROPRIETORSHIP IS AN UNINCORPORATED BUSINESS STRUCTURE OWNED BY ONE INDIVIDUAL TAXPAYER, FOR TAX PURPOSES, THERE IS NO DISTINCTION BETWEEN A SOLE PROPRIETOR AND ITS OWNER (A DISREGARDED ENTITY)
WHAT ARE SOME EXAMPLES OF TYPICAL ORDINARY AND NECESSARY BUSINESS EXPENSES?
SEE SCREENSHOT
WHAT IS A PASS THROUGH ENTITY?
SUCH AS A PARNTERHSIP OR S CORPORATION, IT IS AN ENTITY DISTINCT FROM ITS OWNERS FOR TAX PURPOSES AND IS GENERALLY NOT SUBJECT TO INCOME TAX AT THE ENTITY LEVEL.
WHAT IS THE TREATMENT OF PASS-THROUGH ITEMS FOR PARTNERSHIPS?
A K-1 REPORTS GAINS, LOSSES, INTEREST, DIVIDENDS, EARNINGS, AND OTHER DISTRIBUTION TO THE OWNERS OF PASS-THROUGH INVESTMENTS. THESE CAN BE SEPARATELY OR NONSEPARATELY STATED ITEMS.
WHAT ARE SOME EXAMPLES OF SEPRATELY STATED ITEMS?
SEE SCREENSHOT
WHAT ARE GUARANTEED PAYMENTS TO PARTNERS?
SEE SCREENSHOT
WHAT ARE SPECIAL ALLOCATIONS AND ALLOWANCES WHEN ALLOCATING INCOME/LOSS TO PARTNERS?
THEY ARE CONSIDERED FIRST PRIOR TO ALLOCATING ANY REMAINDING INCOME OR LOSS TO PARTNERS
WHAT IS A PARTNER DEUCTIBLE LOSS LIMITATION?
SEE SCREENSHOT
WHAT ARE THE SELF-EMPLOYMENT TAX REQUIREMENTS?
SELF EMPLOYED TAXPAYERS ARE REQUIRED TO PAY 15.3% IN SE TAX ON NET EARNING OF 400$ OR MORE EXAMPLES ARE,
SE INCOME REPRESENTS THE NET EARNING OF AN INDIVIDUAL FROM A TRADE OR BUSINESS CARRIED ON AS A SOLE PROPRIETOR OR PARTNER, OR FROM RENDERING SERVICICES AS AN INDEPENDENT CONTRACTOR.
1) NET EARNING FROM A SOLE PROPRIETORSHIP
2) DISTRIBUTIVE SHARE OF PARTNERSHIP INCOME
3) GUARANTEED PAYMENTS
12.4 OF SS AND 2.9 OF MEDICARE.
- SELF EMPLOYED INDIVIDUALS ARE ALLOWED A DEDUCTION OF 50% AS A BUSINESS EXPENSE
IF ASKED FOR THE NET EARNINGS FROM SELF EMPLYMENT THE ASSUMPTION IS TO MULTIPLY IT BY 92.35%
WHATS THE DIFFERENCE BETWEEN AN S CORP AND A PARTNERSHIP?
UNLIKE PARTNERS, S CORPORATION SHAREHOLDERS ARE NOT SUBJECT TO SELF EMPLOYMENT TAX OF THEIR DISTRIBUTIVE SHARE - FYI
WHAT IS QUALIFIED BUSINESS INCOME SECTION 199A?
QBI - ANY BUSINESS THAT IS NOT,
1) A SPECIFIED SERVICE TRADE OR BUSINESS (SSTB)
2) A SERVICE PERFORMED AS AN EMPLOYEE
THE DEDUCTION CAN BE 20% OF QBI, THE DEDUCTION IS CLAIMED ON THE T/R OF AN ELGIBLE INDIVIDUAL, TRUST OR ESTATE.
QBI IS THE NET OF INCOME ITEMS RELATED TO CONDUCTING A TAXPAYER’S QUALIFIED BUSINESS AND IS INCLUDIBLE IN TAXABLE INCOME.
QBI IS THE NET OF INCOME, DEDUCTIONS, GAIN, AND LOSS THAT FLOWS THROUGH TO A TAXPAYER FROM A QUALIFIED BUSINESS.
QBI DOES NOT INCLUDE INVESTMENT INCOME, CAPITAL GAINS AND LOSSES, OR DEDUCTIONS ALLOCABLE TO INVESTMENT INCOME OR CAPITAL GAINS AND LOSSES.
GENERALLY INCOME FROM SSTB IS NOT INCLUDED IN QBI DEDUCTION UNLESS IT MEETS THE THRESHOLD REQUIREMENTS.
WHAT ARE THE VARIOUS IRS SCHEDULES FOR FORM 1040? SCH A-F?
SEE SCREENSHOT
WHAT IS THE ORDER OF DISTRIBUTIONS IN A PARTNERSHIP TERMINATION?
SEE SCREENSHOT
