21.1 PARTNERSHIPS Flashcards
WHAT ARE THE CHARACTERESTICS OF A PARTNERSHIP?
WHAT ARE SEPARATELY AND NONSEPARATELY STATED ITEMS IN A PARTNERSHIP?
SEPARATELY STATED ITEMS REPRESENT ITEMS THAT ALLOW SPECIAL TREATMENT ON THE PARTNERS OWN TAX RETURN.
NONSEPARATELY STATED ITEMS ARE ORDINARY BUSINESS NET INCOME/LOSSES
*PAY ATTENTION THE FACT PATTERN, IF ITS ASKING HOW MUCH WOULD BE INCLUDED IN THE TAXPAYERS AGI, THEN ITEMS SUCH AS TAX EXEMPT INTEREST INCOME WOULD BE EXCLUDED, ALTHOUGH IT FLOW THROUGH TO THE TAXPAYER.
INTEREST EXPENSE ASSOCIATED WITH ORDINARY BUSINESS ENDEAVORS (INTEREST EXPENSE ON BANK LINE OF CREDIT) ARE INCLUDED AS NONSEPARATELY STATED ITEM,
INTEREST EXPENSE ASSOCIATED WITH INVESTMENTS INTEREST IS A SEPEARATELY STATED ITEM
HOW DO DETERMINE THE INCOME REPORTED BY A PARTNER ON AN INDIVIDUAL TAX RETURN FOR PARTNERSHIPS?
DISTRIBUTIONS ARE GENERALLY A RETURN OF CAPITAL (NOT TAXED) TO THE PARTNER REDUCING EACH RECEIVING PARTNER’S TAX BASIS IN THE PARTNERSHIP.
IF DISTRIBUTIONS EXCEED THEIR PARTNERSHIPS INTEREST THEY ARE CONSIDERED CAPITAL GAINS.
THEY USUALLY ARE NOT INCLUDED IN AGI UNLESS THEY ARE CAPITAL GAINS
FYI - CASH DISTRIBUTIONS TO PARTNERS ARE NOT AN EXPENSE OF THE PARNTERSHIP.
WHAT ARE GUARANTEED PAYMENTS?
- DOES NOT EFFECT PARTNERS TAX BASIS
- NOT BASE ON PARTNERSHIP INCOME/LOSS
WHAT IS THE TREATMENT OF RECOURSE AND NONRECOURSE LIABILITY FOR INCREASING A PARTNERS BASIS.
BOTH RECOURSE AND NONRECOURSE DEBT INCREASES THE BASIS OF THE GENERAL PARTNER,
THE PROPRTIONATE SHARE OF RECOURSE DEBT IS ADDED TO THE BASIS OF PARTNER,
THIS IS IN ADDITION TO THE INCREASE OR DECREASE IN PARTNERSHIP LIABILITIES THROUGHOUT THE YEAR AND THE COMPUTATION OF AT RISK
HOWEVER BECAUSE THE LIMITED PARTNER HAS LIMITED LIABILITY ONLY NON RECOURSE DEBT IS ADDED,
*IF A PARTNER CONTRIBUTES PROPERTY THE BASIS IS THE ADJUSTED BASIS MINUS ANY ANY LIABILITY ASSOCIATED WITH THE PROPERTY, HOWEVER ITS PROPORTIONATE SHARE OF LIABILITY IS ADDED TO THE BASIS
WHEN IS UNANIMOUS CONSENT OF ALL GENERAL PARTNERS REQUIRED?
