R4 Ptnerships, Estate/Gift tax, Ethics etc Flashcards
Partnership Formation G/L treatment
NO G/L
exceptions:
svces provided - ptern recogs ord inc @fmv of int
prop give-> liabs>AB = excess= gain to ptner
Outside Basis
Ptner basis in interest
cas + prop@AB -shareliabs other ptners take care of + %liabs i take care of
if neg number then basis is zero
distribs later on will decrease AB
increase of share of liabs increases AB
Inside Basis
Ptship basis in the assets received
basis = Ptner AB + gain recog by ptern
holding periods
cap/1231- includes ptners HP
ordinary assets- HP begins at contrib
Special Alloc
BING/L
when sold later, the orig BING/L is alloc to the cont ptner ONLY and the excess over that is alloc to ALL ptners including him
Ptnership terminations
Effects & how it terminates
terminates if:
- > 50% interest changes hands within 12 months
- operations cease
- 1 ptner left = sole prop
effects
- deemed distrib of assets to ptners and the purch
- Hypothetical recontrib of assetsto a new ptship
Transactions between a Ptship & the Ptner
Losses disallowed- add back to income the loss amount when calc the %share of income of ptner
Gains- on sale/exch of prop - ord or capG
guaranteed pmts
not based on ratio or on profits
not reduce AB - deduc by ptship - includible in ptner GI
Retirement Pmts
distrib treatment - reduce AB and when it reaches zero then the ptner recogs income.
Nonliquidating & Liquidating Distribs
Basic Idea and G/L recog
Nonliquidating
- reduce AB by ABprop.
ABprop cant be>ABint-cash. if it is then ABprop gets whatever is left of ABint
not zero out. can have leftover in AB int
Liquidating
- give all your leftover ABint to the prop. must zero out.
gains for both recog if cashrecd>AB int
Loss only
Sale of Ptship interest
AB (including %liabs)
(amt realized) —> (cash &liabs they take over)
= G/L -> CAPG/L except for part that represents AR/inv/depr prop
Estates tax rets
Estate income tax - reqd when estate >600
Estate tax- 9mths after death. include 50%married prop, stuff in jt tenancy, incomplete&revocable gifts
DNI
Limit on amount the estate can deduct
only income stuff nothing about corpus
deduction-> lesser of DNI-taxexempt income OR actual distrib
benef recogs income up to DNI amount. excess over that not recog
Simple vs. Complex
COmplex- you may do what you want
-may accum earnings, distrib princ, deduct max cont. exemption 100
Simple
distrib ALL income. must keep corpus
300 exemption
medical and admin exps
usually deducted from estate return BUT can elect to deduct on last inome tax return if waive
deductions and credits on estate ret
unlmtd char deduc
unlmitd marital deduc
1,722,800 credit
OR 5,120,000 deduction
if deduc not used fully by husband, the wife can use the leftover when she dies
Gift tax exclusion
13k
26k MFJ
per person and per year
Tax preparer penalties
Undstmt -> unreas pos = greater1k or 50%$recd Undstmt -> Reckless conduct =5k or 50%$ Not give copy of tax ret - (50) Not sign Not put tax ID # Not retain records not file correct info returns endorsing a check (500) screwing up the Earned income credit aiding&abetting undstms - even if had no knowl - 1k ppl 10kCorps disclose info - 250 -- can only disclose to court orders, state/local tax, peer review
Cicular 230 Duties
address the practice before IRS of practitioners
- provide info
- not delay
- not help disbarred
- exIRS waiting periods
- fees- not unreasonable
- conflict of int bet clients- still can rep
- soliciting- not fake, if you publish prices cant charge more
Circular 230 Doc Standard
NOT frivolous
inform of reas likely penalties
rely on info but make reas inquries
know of prob-> tell client -> cant go to IRS
-due diligence in prep and determining correctness
-return records unless fee dispute but still let them copy
Covered opinion
about listed trans OR entity/plan/ptships that have tax evasion/avoidance as a purpose
Marketed Opinion
used to sell, promote, mkt, a ptship, invmt plan, arrangment
NOT includ listed trans OR entity/plan/ptships that have tax evasion/avoidance as a purpose
Reliance Opinion
covered opinion
>50% chance issue will be solved in your favor
NOT include listed trans OR entity/plan/ptships that have tax evasion/avoidance as a purpose
only if disclose that advice not intended to avoid penalties
Taxpayer penalties
Earned Income credit wrong - lose 2 yrs not make estim pmts not file -5%tax due each moth not pay - 1% tax due each month undstmt/negligence - 20% undstmt undstmt/substantial - 20% substantial valuation misst - 20% fraud - 75% undstmt plus jail time etc
Reducing penalties for taxpayers - standards of conduct
NOT frivolous pos
Reas basis - 50%
AICPA Standards
Tax Return Position -not frivolous
answers to Q- answer all even if not imp
estimate use - not need discl can rely
dep from prev position in court - can do if not bound
knowl of error- tell client not IRS without consent
form/content of advice -not need to update if not implementing
