Partnership- Secrion 4 Flashcards
Tax form
1065
Similar to a Corp
Each partner gets a k1 that flows through sch e
Due 3/15
Informally All partners have unlimited liability 5 month extension Tax year must be same as partners Cash and property carryover basis carryover holding period - tax feee exchange
Services - FMV - taxable
No 80% rule !!
Capital assets 1231- carryover basis and holding period all other assets would be when acquired
Net outside basis*****
Standing outside the partnership that is the basis
Basis in partnership standing outside partnership
I risk contribution + percentage income loss , sep stated and muni - distribution received _____= net outside basis
Inside basis*****
Basis inside the partnership to the partnership
Basis in received asset
Given asset, what is basis to pick up for? Later
Liquidating - basis has to go to zero.
Non liquidating - distribution , still there, current distribution… pick up for lower of inside or outside
Guaranteed payment
Amount partner is guaranteed to get, like a salary in sCorp
Ordinary income to partner and ord expense to partnership
Taxable to partner receiving, subject to self employment. Considered separate stated item. Sep stated bc if there’s a loss then the government still wants to tax the gPmt
Ord business expense to partnership
Not based on income, based on services or capital .
Part of net business income . But sep stated
Partnership operation
Plus partnership liabilities
Minutes contributed liabilities
Equals outside basis
Bc at risk. These are the 2 at the end of equation
Partner basis
Important concept in ps tax law
Generally Equals the amount the partner has at risk in the partnership, unless it’s specified as to why p is not at risk for such amount
Not identical to P equity or capital in the business since a partners includes p share of liability to creditors , capital account doesn’t .
Capital accounts
Represents the p share of ps equity : ps assets- liabilities
Separately maintained for each p
Analysis of capital account is on sch k1
Does not include the p share of ps liabilities
(Basis does)
Basis
Goes up with :
Contributions, borrowing another debt bc at risk for more , allocation of ps income more money so goes up,
Decrease:
Distributions of assets
Allocation of ps losses
Repayments of other debts
can never go below zero …
loss reducing basis below zero is never deductible
If you get a cash distribution exceeding basis it is a gain
Contributed assets subject to higher liability results in gain **
Outside basis ***
Ex :
Using the equation
Don’t use FMV - example video
Contributed asset **
Subject to a higher liability results in gain.
Example shows 800$ gain bc there was an 800 (loss)
Operation
3/15
Separately still applies
Guaranteed payment is below the line separately stated to partner receiving money
Guaranteed payments to partners
Payments not based on an amount of partnership income or loss but on separate contractual relationships between the Ps and partner , services or use of capital, regardless of ps income
They are ordinary bus expenses of ps , so included in determination of ordinary income of ps. Sep stated on p k1 z
Ps to partner
Separate
Unless 50% ibtest,!losses from sale of property between controlling p and ps aren’t allowed , gains are ord income .
