Partnerships - ninja

Question 1

Form 1065

Answer 1

A tax document used to report the profits, losses and deductions of a business’ partners. Form 1065 is part of the Schedule K-1 document, and is prepared for each individual partner. The document identifies the percentage share of profit and loss assigned to each partner, both at the beginning of the reporting period and at the end.

Question 2

Are partnerships a taxable entity?

Answer 2

No, not a legal taxable entitiy. income and expenses flow through to a partner via form k-1

Question 3

Property for partnership interest exchange

Answer 3

non taxable event - no gain or loss recognized.

Question 4

donate 4000 basis with a 6000 mortgage for 20% interest

Answer 4

4000 - 4800 (6000 x 80%) = 800 CAPITAL GAIN

No basis for partner

4800 basis for partnership on the property

Question 5

Services for partnership interest exchange

Answer 5

Taxable event / treated the same as compensation

use % of partnership interest
x FMV of partnership
=taxable income

Question 6

Partnership holding period of an asset

Answer 6

inherits holding period of asset contributed

except: inventory - holding period begins when contributed

Question 7

Startup costs for a partnership

Answer 7

Tax treatment same as that of an individual taxpayer

syndication fees (prepping offering materials) are NOT deductible or amortized

Question 8

Deductions to arrive at partnership incomeq

Answer 8

• cogs
• wages (except for partners)
• guarenteed payments
• business bad debt (accrual basis only)
• interest paid (payments to partners OK)
• depreciation (except 179)
• amortization of start up costs

= partnership income

Question 9

Section 179

Answer 9

allows a taxpayer to elect to deduct the cost of certain types of property on their income taxes as an expense, rather than requiring the cost of the property to be capitalized and depreciated.

Question 10

Partnership losses

Answer 10

Cannot be taken below basis

loss is carried forward until basis is available

Question 11

beg basis 2400
plus income 200
minus ordinary loss -3000

Answer 11

0 basis, 400 loss carried forward until basis is available.

Question 12

Guaranteed payments

Answer 12

appear in partner’s income during year in which fiscal year CLOSES.

6/1/14 - 5/31/15 fiscal year. If payment was received in 2014, it is income on the 2015 individual return.

Question 13

Partnership benefits (health insurance / life insurance)

Answer 13

Treated as guaranteed payments and are self-employment income.

Question 14

Guaranteed Payments - SE income

Answer 14

% share of ordinary partnership income from K1
+ Guaranteed Payments
-% share of 179 expenses

= SE income subject to self-employment tax

Question 15

Items not deductible on Schedule K

IFC179

Answer 15

Investment Interest Expense
Foreign Tax Paid
Charitable Contributions
179 Expense

Instead, these flow to Partner’s K1

Question 16

Items not counted as income on Schedule K

PP1231

Answer 16

Passive income
Portfolio Income
1231 G/L

Question 17

Partnership Basis Calculation

Answer 17

Beg Basis
\+Capital Contributions
\+Share of ordinary income
\+capital gains
\+tax exempt income

Question 18

Partnership basis is decreased by

Answer 18

• Money distributed
• Adjusted basis of property distributed
• share of ordinary losses
• partnership is relieved of a liability

Question 19

Partnership Taxable Year

Death of a partner

Answer 19

Must be the same as 50% of partners and use the same tax year for 3 years

NOTE: Death of a partner - taxable year only closes with respect to partner and their partnership interest

Question 20

Partnership can’t use cash basis if

Answer 20

Partnership has:

• inventories
• tax shelter
• corporation is a partner
• gross receipts of

Question 21

Sale of partnership interest - hot assets

Answer 21

unrealized receivables

appreciated inventory