R4 - Partnerships Flashcards
What goes into partner’s initial basis?
Cash
NBV of property
LESS: liabilities assumed by other partners
FMV of services rendered
Liabilities assumed by the incoming partner
How does a partner recognize gain if he contributes services in exchange for partnership interest?
Ordinary income = % equal to his partnership interest in FMV of partnership’s assets
What happens if a partner contributes a property with a FMV not equal to its NBV and later on the partnership sells the asset?
The built-in gain/loss existing at the date of the CONTRIBUTION is specially-allocated to the partner who contributed it
What is partnership’s basis in the contributed property?
NBV + any gain recognized by the incoming partner, if that election is made
What are possible partnership tax years?
Calendar or fiscal - 3 month deferral maximum (oct, nov, dec)
What if a partner enters into a transaction with a partnership as an outsider?
F.ex. Buying an asset
If he owns more than 50% - he’s a related party in which case:
Loss - disallowed
Gain - ordinary
What is a guaranteed payment?
Distribution to a partner for services or capital provided
WITHOUT regard to partnership income or profit/loss sharing ratio
How are payments to a retired partner treated?
Ordinary income to partner
Deduction to partnership
Are syndication fees deductible?
No!
What happens if a partnership distributes property and partner’s basis is less than NBV?
No gain is recognized!!!
Partner gets basis in the asset = basis in the partnership before distribution after cash received, if any
His basis in the partnership becomes $0
In a liquidating distribution how is gain recognized, if any?
Only to the extent of MONEY received
After cash - zero-out to get out
Can a partner recognize a loss on a liquidating distribution?
YES - if he only receives cash, unrealized A/R or inventory
What is the character of gain on sale of partnership interest?
Capital, unless some or all of it is “hot assets”
Unrealized receivables
Appreciated inventory
Recapture income in depreciable assets owned by partnership
If an estate or trust has a capital gain or loss, does it get distributed to the beneficiary?
No - it stays with the trust and is classified as principal absent written provision to the contrary
How is DNI calculated?
Gross income less deductions
ADD: adjusted tax-exempt interest
Capital gains are excluded from calculation
What are estate and trusts allowable deductions?
Carrying on a trade or business
Production of income
Preservation of income producing property
CPA fees
Charitable contributions - unlimited, if such contribution is provided for in the will
What two items are apportioned between principal and income?
Annuities
Interest (bond amortization - principal, the rest is income)
What is income distribution deduction limitation?
The lesser of:
Actual distribution
DNI
What is estate exemption amount?
$600
What are estates and trusts tax years?
Estate - calendar or any fiscal
Trust - calendar ONLY
What are simple trust’s features?
Distributions out of income ONLY, not corpus
MUST distribute all of it currently
No charitable contribution deduction
$300 exemption
What are complex trust’s features?
May accumulate income
May distribute principal
May deduct charity
$100 exemption
What is an estate tax return?
When it must be filed?
What’s the deadline?
Form 706
9 months after death
File only if the gross value of the estate + taxable gifts are over 5,120,000
What goes into estate value?
FMV property owned Insurance proceeds Incomplete gifts Revocable transfers All property entitled to be received
What are estate non discretionary expenses?
Medical - estate OR 1040 as an option Administrative - estate OR 1040 as an option Outstanding debts Claims against the estate Funeral costs Certain taxes
What are estate discretionary expenses
Unlimited charitable and marital deduction
