Partnership Taxation

Question 1

pass through concept

Answer 1

partnership- doesn’t pay tax- individual parters pay tax on their share of the income

Question 2

Info return

Answer 2

Still required to file and annual information return
Can’t take an itemized individual deduction, charitable deduction, capital loss and NOL carryovers, or LT capital gains deduction.

These are claimed by the partners on their individual returns

Question 3

Partnership Distributive Shares

Answer 3

Each partner must include pro rata share of income

Question 4

Formation of Partnership

Answer 4

Transfer of property to partnership in exchange for interest in partnership- non recognition

Question 5

Basis

Answer 5

Basis- cost if money was contributed
if Property- same basis partnership as she had in the property contributed
Basis can change with income and increased liabilities and distributions and losses

Question 6

Sale of interest

Answer 6

Interest is a capital asset
Realized on disposition of property
Gain from sale is taxable as ordinary income if gain is from unrealized receivable or inventory

Question 7

Liquidation

Answer 7

no gain or loss upon liquidation except gain if money received exceeds her basis and loss will be recognized if her basis exceeds money received