Final Class Notes

Question 0

How often is partnership basis calculated? S-corporation ?

Answer 0

Annually

Question 1

Partnership basis equation

Answer 1

Beginning basis
\+ % partnership income
- distributions
\+ additional contributions
\+ % of loans
= partnership basis

Question 2

Loss distributed to partner in year of loss shows up on…

Answer 2

Partner’s annual return

Question 3

What can you only take a deduction up to in a partnership? What happens after that?

Answer 3

Can only take deduction up to basis in partnership

Deduction passed basis gets suspended

Question 4

What is needed in changing a partnership structure?

Answer 4

New legal paperwork

Question 5

In partnerships deductions flow through to…

Answer 5

Individual tax returns

Question 6

What entity is publicly traded aside from a c corporation?

Answer 6

LLPs

Question 7

Triple net lease

Answer 7

Next to no down payment

Tenants pay taxes, utilities and mortgage

Question 8

Who benefits from an audit?

Answer 8

Shareholders, bankers and other outside parties

Question 9

In a partnership when you distribute noncash property to partnership you no longer…

Answer 9

Directly own the property

Question 10

What do successful operations provide?

Answer 10

A return

Question 11

Do partnerships and S corps pay taxes?

Answer 11

Only on certain transactions

Question 12

Is there an interest deduction for tax free investments?

Answer 12

No

Question 13

What is critical to know when a flow through entity distributes a loss?

Answer 13

Basis

Question 14

When loss is distributed what can it only be deducted up to? What happens afterwards?

Answer 14

Can only be deducted up to basis

Rest of loss is suspended until gain is recognized in future years

Question 15

S corps: fringe benefits

Answer 15

Deducted from corporations

Taxable to S corp shareholders

Question 16

Recourse loans

Answer 16

Partners still liable even if partnership goes out of business

These loans increase basis, treated as additional contribution
Of capital in basis

Question 17

Stop loss

Answer 17

Prevents partnership from manipulating numbers to receive

Government refund year after year

Question 18

Why do distributions rarely exceed yearly earnings?

Answer 18

Because it will reduce basis

Question 19

Are S corporations publicly traded?

Answer 19

No

Question 20

Where does an NOL end up when a partnership has one?

Answer 20

NOL goes on partner’s personal return

Question 21

Tax treatment of distribution to partner or shareholder?

Answer 21

Usually nontaxable

Question 22

Distribution define

Answer 22

Cash or noncash property that is distributed to individual from
Entity

Question 23

What does basis limit?

Answer 23

Loss recognition

Question 24

What happens when a partnership disposes of a noncash asset?

Answer 24

Gain or loss is calculated and allocated to partners separately
State items based own their ownership interest

Question 25

Does a corporation need to be registered?

Answer 25

Yes

Question 26

What is the process of registering an S corp?

Answer 26

Simultaneously register it as a C corp, then as an S corp