Partnerships

Question 1

What is a general partner’s role in management and for what are they liable?

Answer 1

Can participate in management and have joint and several liability for the partnership’s debts.

Question 2

What items decrease a partner’s basis in a partnership?

Answer 2

Distributions;
Proportionate share of expenses, including deductions, losses, and nondeductible expenses;
Proportionate share of decreases in liabilities.

Question 3

How are contributions to a partnership accounted for?

Answer 3

Generally recognize no gain or loss on contributions;
No control club requirement;
Must recognize income for partnership interest received for services equal to the value of the partnership interest received.

Question 4

Define “partnership.”

Answer 4

An association of two or more taxpayers to operate a business that is not taxed as a corporation.

Question 5

What items increase a partner’s basis in a partnership?

Answer 5

Contributions of property;
Proportionate share of income, including gains and exempt income;
Proportionate share of increases in liabilities.

Question 6

Using the carryover basis, what is a partnership’s basis for contributed property?

Answer 6

Carryover basis - the adjusted basis of the property in the hands of the partners.

Question 7

What is a partner’s basis in a partnership?

Answer 7

Cash contributed, plus substituted basis from any assets contributed to the partnership, less any associated debt assumed by the partnership, plus partner’s proportionate share of any associated debt assumed.

Question 8

What is a limited partner’s role in management and for what are they liable?

Answer 8

Only liable up to their investment, but they cannot participate in management.