Final Class Notes Flashcards
How often is partnership basis calculated? S-corporation ?
Annually
Partnership basis equation
Beginning basis \+ % partnership income - distributions \+ additional contributions \+ % of loans = partnership basis
Loss distributed to partner in year of loss shows up on…
Partner’s annual return
What can you only take a deduction up to in a partnership? What happens after that?
Can only take deduction up to basis in partnership
Deduction passed basis gets suspended
What is needed in changing a partnership structure?
New legal paperwork
In partnerships deductions flow through to…
Individual tax returns
What entity is publicly traded aside from a c corporation?
LLPs
Triple net lease
Next to no down payment
Tenants pay taxes, utilities and mortgage
Who benefits from an audit?
Shareholders, bankers and other outside parties
In a partnership when you distribute noncash property to partnership you no longer…
Directly own the property
What do successful operations provide?
A return
Do partnerships and S corps pay taxes?
Only on certain transactions
Is there an interest deduction for tax free investments?
No
What is critical to know when a flow through entity distributes a loss?
Basis
When loss is distributed what can it only be deducted up to? What happens afterwards?
Can only be deducted up to basis
Rest of loss is suspended until gain is recognized in future years
S corps: fringe benefits
Deducted from corporations
Taxable to S corp shareholders
Recourse loans
Partners still liable even if partnership goes out of business
These loans increase basis, treated as additional contribution
Of capital in basis
Stop loss
Prevents partnership from manipulating numbers to receive
Government refund year after year
Why do distributions rarely exceed yearly earnings?
Because it will reduce basis
Are S corporations publicly traded?
No
Where does an NOL end up when a partnership has one?
NOL goes on partner’s personal return
Tax treatment of distribution to partner or shareholder?
Usually nontaxable
Distribution define
Cash or noncash property that is distributed to individual from
Entity
What does basis limit?
Loss recognition
What happens when a partnership disposes of a noncash asset?
Gain or loss is calculated and allocated to partners separately
State items based own their ownership interest
Does a corporation need to be registered?
Yes
What is the process of registering an S corp?
Simultaneously register it as a C corp, then as an S corp
