Partnership Taxation Flashcards

1
Q

False. Income and expenses flow through to the partner to be taxed via a
Form K-1.

A

Partnership taxation

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2
Q

Neither gain nor loss is recognized in an exchange of property for a partnership interest. It is a non-taxable event.

A

Partnership taxation

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3
Q

Initial basis for partnership property is the basis of the property that was contributed or exchanged for the partnership interest.

A

Partnership taxation

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4
Q

It is a taxable event; treated the same as compensation for the services. The taxable income equals the % of partnership interest received times the FMV of the partnership.

i.e. the FMV of the interest received is the taxable income for the service provider.

A

Partnership taxation

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5
Q

The basis in the partnership interest is the amount of taxable service revenue provided by service provider.

A

Partnership taxation

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6
Q

The partnership inherits the holding period of the asset contributed.

The exception of inventory- the holding period begins when contributed.

A

Partnership taxation

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7
Q

Tax treatment is the same as that of an individual taxpayer.

However syndication fees are not deductible or amortized.

A

Partnership taxation

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8
Q

COGS
Wages - except for partners
Guaranteed payments to partners
Business bad debt (if on accrual basis)
Interest paid
Depreciation (except section 179)
Amortization (Startup costs; goodwill; etc)

A

Partnership taxation

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9
Q

Losses cannot be taken beyond a partner’s basis in the partnership

Losses in excess of basis are carried forward until basis is available

A

Partnership taxation

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10
Q

They appear in partner’s income during the year in which the partnership’s fiscal year CLOSES.

A

Partnership taxation

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11
Q

Health insurance; life insurance and other benefits paid on behalf of the partner are treated as guaranteed payments and are includable as self-employment income.

A

Partnership taxation

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12
Q

Partner’s % share of ordinary income from partner’s K-1
+ Guaranteed payments
- Partner’s % share of section 179 expense from K-1
= Self-employment income (subject to SE tax)

A

Partnership taxation

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13
Q

Partner’s basis is basis of goods exchanged or for services exchanged is FMV of partnership interest received.

If purchased; purchase price less liabilities incurred = basis.

For a gifted interest in a partnership; gift basis rules apply.

A

Partnership taxation

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14
Q

Foreign tax paid
Investment interest expense
Section 179 expense
Charitable contributions

Mnemonic: IFC179

A

Partnership taxation

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15
Q

Passive Income
Portfolio Income
1231 Gain or Loss

Mnemonic: PP1231

A

Partnership taxation

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16
Q

Beginning partnership basis
+ Capital contributions
+ Share of ordinary partnership income
+ Capital gains
+ Tax-exempt partnership income (DON’T FORGET!)
= Ending partnership basis

A

Partnership taxation

17
Q

Money distributed
Adjusted basis of property distributed
Partners’s share of ordinary losses
Partnership is relieved of a liability (considered a distribution)

A

Partnership taxation

18
Q

Partnership getting a loan
Capital contributions
Ordinary income
Capital gains
Tax-exempt income

A

Partnership taxation

19
Q

If the partnership gets a loan; this INCREASES basis.

If partnership is relieved of a liability; this DECREASES basis.

A

Partnership taxation

20
Q

They do not affect basis- they are already included in ordinary income; which affects basis.

A

Partnership taxation

21
Q
  1. Increase basis (all items; including tax-exempt income)
  2. Distributions
  3. Losses (limited to basis)
A

Partnership taxation

22
Q

It must be the same as 50% of the partners and use the same tax year for 3 years once adopted.

A

Partnership taxation

23
Q

The taxable year closes with respect to the decedent partner’s interest ONLY.

A

Partnership taxation

24
Q
  1. They have inventories
  2. Partnership is a tax shelter
  3. Has a corporate partner
  4. Gross receipts are $5 Million or more

Exception: If gross receipts are $1 Million or LESS and Partnership maintains inventories; Cash method is ok.

A

Partnership taxation

25
Q

When there is less than 2 partners (only one partner)

When 50% of the partnership interests sell within a 12 month period- partnership IMMEDIATELY terminates.

A

Partnership taxation

26
Q

Gain or Loss = Amount realized on sale - basis in partnership interest

A

Partnership taxation

27
Q

Basis = Capital account + Liabilities assumed

A

Partnership taxation

28
Q

As ordinary gain/loss.

Items that fall into non-capital category would be unrealized receivables; appreciated inventory; and similar.

A

Partnership taxation

29
Q

FMV of Assets (non-capital)
- Adjusted basis of assets
= Ordinary gain
x Partner’s % interest
= Partner’s share of gain

Note: No gain or loss will be recognized by a partnership upon distribution of property.

A

Partnership taxation

30
Q
  1. Money distributed
  2. Adjusted basis of unrealized receivables and inventory
  3. Adjusted basis of other property

Note: Only MONEY distributions will trigger a gain in a partnership distribution.

A

Partnership taxation

31
Q

Only in a liquidating distribution.

A

Partnership taxation

32
Q
  1. Money was distributed
  2. Unrealized receivables were distributed
  3. Appreciated inventories were distributed

Otherwise; no loss recognized.

A

Partnership taxation