R3 M6 - Partnership (Notes) Flashcards
Partnership –> Form 1065 –> Schedule k-1 —> Form 1040
Partnership file Form 1065 for informational return.
- Each partner is liable only for taxes due on their distributive share of partnership income as reported on Schedule K-1, regardless of if there no distribution to them.
Organizational Expenditure and Start-up Costs
A partner’s tax basis in Partnership Interest
A partner’s basis in his or her partnership’s interest includes the partner’s capital account (money invested) plus the partner’s share of partnership debt.
A partner’s share of partnership debt includes
–> Debt for which the partner has personal liability (recourse debt)
–> Partner’s share of partnership debt secured by property (nonrecourse debt).
What increase and decrease basis
How to calculate a Partner’s Tax Basis in Partnership Interest.
What is the different type of partnership?
What is the different type of debt?
- General partnership, limited partner or LLC member
- Nonrecourse –> (Secured). You can only go after the collateral
recourse debt –> personal guaranteed. You can go after more when the person default.
Choice “C” is correct. Only the filing fees incident to the creation of the partnership are eligible expenditures. Generally, expenditures up to $5,000 can be immediately deducted. Remaining expenses are amortized over 180 months.
$5,000 in organizational expenditures and start-up cost are deducted. The $5,000 organizational expenditure and start-up cost that is deducted is reduced by the cost that exceeds $50,000. For example, $52,000 organizational expenditure will only have $3000 deducted from the $52,000 = $49,000 / 180 months.
The allowable organizational costs are legal service fee to have a partnership agreement, fees paid for accounting service and fees paid for partnership filings The permitted cost for start-up cost is training cost, testing and advertising cost incurred before starting the business.
