Chapter 4 Section 2: Partnership Taxation Flashcards Preview

REGULATION > Chapter 4 Section 2: Partnership Taxation > Flashcards

Flashcards in Chapter 4 Section 2: Partnership Taxation Deck (21)
Loading flashcards...
1
Q

In general, is the formation of a partnership taxed?

What’s the exception?

A

No - no G/L
Interest acquired for services rendered (FMV)
Property subject to excess liability

2
Q

What do your liabilities assumed by others do to your basis?

What does assuming other peoples’ liabilities do to yours?

A

Decrease

Increase

3
Q

What’s the holding period for assets contributed to the partnership?

A

Use the old owner’s holding period.

4
Q

What does special allocation of contributed appreciated property mean?

A

When a partner contributes property with a FMV higher or lower than the NBV, a built-in gain/loss exists. Upon the subsequent sale of the property, the built-in gain/loss is allocated to the contributing partner

5
Q

What’s the basis of property contibuted to a partnership?

A

NBV or debt assumed

6
Q

What does inside basis mean?

A

Basis the partnership has in the asset it owns.

7
Q

What does outside basis mean?

A

The basis a partner has in their ownership interest in the partnership.

8
Q

What goes into a partner’s basis?

A

Capital account + partner’s share of liabilities.

9
Q

What is the partnership tax return form?

A

1065

10
Q

When does a partnership terminate?

A

Operations cease
50% or more of the interest is sold within any 12 month period
There are less than 2 partners

11
Q

For a transaction between a partner and partnership, what do you do with gains and losses?

A

Loss is not allowed (related party in WRAP)

Gain is ordinary

12
Q

What portion of their distributive share of partnership income needs to be included in their 1040?

A

All of it, even if it hasn’t been distrbuted

13
Q

What are partnership losses limited to on the 1040?

A

The partner’s at-risk basis (excludes nonrecourse loans)

14
Q

Define guaranteed payment

Are they deductible?

A

Reasonable compensation paid to a partner for services rendered or use of capital without regard to his ratio of income.
Yes, they’re deductible to the partnership, and taxable income to the partner

15
Q

What are syndication costs?

Are they deductible?

A

They are the cost of raising money

They are not deductible

16
Q

Are nonliquidating distributions taxable?

A

Usually not

17
Q

By what amount do you reduce a partner’s basis when there are nonliquidating distributions?

A

NBV (nontaxable)

18
Q

What are the three ways to liquidate a partnership interest?

A

Complete withdrawal
Sale of partnership interest
Retirement or death

19
Q

What gain do you recognize in a liquidating distribution?

A

Only to the extent that money received exceeds the partner’s basis

20
Q

Do you recognize a gain on the sale of partnership interest?

What’s the exception?

A

Yes - usually capital

If the gain arises from the sale of hot assets, it’s ordinary

21
Q

Define hot assets

A

Unrealized (cash basis) receivables
Appreciated inventory
Recapture income regarding depreciable assets

Decks in REGULATION Class (35):