R5-M3 Partnerships 2

Question 1

what is tax treatment of guaranteed payment in partnership?

Answer 1

• expense to the partnership
• taxable as ordinary income to the partner. included on K-1. Guaranteed payments for services are NOT included in QBI

Question 2

what are tax treatments of organizational cost and startup costs?

Answer 2

• same treatment as individuals and S corp. can deduct $5k and amortized the excess over 180 months/15 years

Question 3

what are differences between tax basis and at risk limitations?

Answer 3

• Tax basis limitation and at risk limitation are similar, except certain NONRECOURSE debt is included in tax basis NOT in at risk basis
• excess losses is LOST when sell with TAX BASIS while the excess loss can be OFFSET against any GAIN when sell with AT RISK basis

Question 4

what is the order when calculating distribution of multiple assets?

Answer 4

1st. cash
2nd. hot assets: inventory and unrealized receivables (for cash basis taxpayers)
3rd. other property

*notes:
- calculate basis left each stage and stop at zero
- if distributed with cash more than basis, the excess cash will be taxable gain
- if distributed with property, there is no gain

Question 5

what are the 4 hurdles of loss limitation?

Answer 5

1. tax basis limitation
2. at risk limitation
3. passive activity loss limitation (PAL)
4. excess business loss limitation

Question 6

what is separately stated interest expense?

Answer 6

Only investment interest expense is separately stated