R4 - Partnership Taxation Flashcards
Partner Basis Formula
Beginning Capital Account (Cash, FMV Services, NBV assets, )
+ % ALL INCOME (Ordinary, Capital, Tax-free)
< % ALL LOSSES > (Partner may take a partnership loss as a tax deduction up to his/her basis)
= Ending Capital Account
+ % Recourse Liabilities
= YEAR-END BASIS
A partner’s basis in the partnership is increased by the partner’s share of:
Partnership liabilities. (This is just one example of many)
Non-liquidating distributions rules:
Assigned basis may not exceed basis in partnership. Stop at Zero basis.
A partnership terminates for income tax purposes when:
50% or more of its interests change hands within 12 months.
When a partnership is terminated for tax purposes and its remaining partners decide to carry on the partnership business in a (deemed) new partnership, tax law treats this as a:
Distribution of the prior partnership;s assets followed by a recontribution of the (deemed) distributed assets to the new partnership.
A guaranteed payment is:
a salary or other payment to a partner that is not calculated with respect to partnership income.
A partner who receives a distribution of non-cash property from a partnership takes:
The partnership’s basis as his basis, but in no case an amount greater than his partnership interest.
The method used to depreciate partnership property is an election made by:
The partnership and may be any method approved by the IRS
When a partner’s share of partnership liabilities increases, that partner’s basis in the partnership:
Increases by the partner’s share of the increase. Since the partner has unlimited liability, the partnership liabilities are treated as if the partner personally borrowed the money and then contributed it to the partnership.
Payments made in liquidation of the interest of a retiring partner are considered a:
Distribution by the partnership. Therefore, a retiring partner continues as a partner until his interest has been completely liquidated by partnership distributions.
In a liquidating distribution, the partner’s basis for the distributed property is:
The same as the adjusted basis of his partnership interest (as the partner is simply exchanging his partnership interest for the distributed assets), reduced by any monies received in the same transaction.
The at-risk limitation provisions of the Internal Revenue Code may limit:
A partner’s deduction for his or her distributive share of partnership losses.
Any losses in excess of the at-risk amount are:
Suspended and carried forward without expiration and are deductible against income in future years from that activity.
Built-in gain rules
The difference between the tax basis and the FMV on the date the partnership was formed is a built-in gain to the partner that contributed the property. The first portion of the gain is allocated to that partner and the remaining gain is then shared equally by all of the partners upon sale of that property contributed.
A nonliquidating distribution to a partner is:
Non-taxable
