REG PARTNERSHIP Flashcards Preview


Flashcards in REG PARTNERSHIP Deck (17):

LIQUIDATING DISTRIBUTIONS - Do you recognize a gain or lossIs it ordinary income or a capital gain.

You can recognize a gain or loss, but only if you receive cash or "hot" assets (money, unrealized receivables or inventory" that exceeds the partners interest.

If you receive something other than cash or hot assets no gain or loss.


Retiring or Deceased Partner liquidation.

Special rules but I have no idea, just use the regular rules, says something about allocating and treat everything as a capital gain or loss.


What is the rule about if property is received in liquidation of a partnership interest and not cash.

NO gain or loss - have to learn what the rules are for allocating basis to property acquired in the distribution.


Now you may get liquidation payments and Other payments. Be careful to treat these as what

Ordinary income.


Other payments in liquidations are __________ what to the partnership.

Deductible as an expense. Like a guaranteed payment.


Are liquidating distributions a gain or loss to the partnership. Not sure what this means here probably when they liquidate property whose FMV is greater than BVU.

NO, that's why the partner picks it up at the lower cost.


What are some Elections Partnerships Make?

What their tax year will be
Section 444 Elections - Exceptions to the Required tax year
What accounting method they will use for depreciation, inventories, amoritization
(entity level) versus partner level
Whether they are going to amoritize or capitalize organizational costs (and start up to)


Examples of Organizational Costs

legal and accounting fees, temporary partners meetings, filing fees
Not Syndication Costs - no, these are costs to market interests in the partnership
but it's OK to amoritize advertising the business itself



Up to $50,000 can expense 5 and amoritize rest over 15 years 180 months


When do you start amoritizing start-up/org costs?

The month you start in business.


Examples of Start up costs that can be amoritized

An analysis or survey of potential markets, products, labor supply, transportation facilities, etc.

Advertisements for the opening of the business (but not for the marketing of the partnership interest)

Salaries and wages for employees who are being trained and their instructors.

Travel and other necessary costs for securing prospective distributors, suppliers, or customers.

Salaries and fees for executives and consultants, or for similar professional services.


This is about other start up costs but is a good example:

Purchasing an active trade or business. Amortizable start-up costs for purchasing an active trade or business include only investigative costs incurred in the course of a general search for or preliminary investigation of the business. These are costs that help you decide whether to purchase a business. Costs you incur in an attempt to purchase a specific business are capital expenses that you cannot amortize.

On June 1st, you hired an accounting firm and a law firm to assist you in the potential purchase of XYZ, Inc. They researched XYZ's industry and analyzed the financial projections of XYZ, Inc. In September, the law firm prepared and submitted a letter of intent to XYZ, Inc. The letter stated that a binding commitment would result only after a purchase agreement was signed. The law firm and accounting firm continued to provide services including a review of XYZ's books and records and the preparation of a purchase agreement. On October 22nd, you signed a purchase agreement with XYZ, Inc.

All amounts paid or incurred to investigate the business before October 22nd are amortizable investigative costs. Amounts paid on or after that date relate to the attempt to purchase the business and therefore must be capitalized.

Notice the dates here, only investigative costs before you purchase are amoritizable, after you purchase you must capitalize.


These are not organizational costs:

Nonqualifying costs. The following costs cannot be amortized.
The cost of acquiring assets for the partnership or transferring assets to the partnership.

The cost of admitting or removing partners, other than at the time the partnership is first organized.

The cost of making a contract concerning the operation of the partnership trade or business including a contract between a partner and the partnership.

The costs for issuing and marketing interests in the partnership such as brokerage, registration, and legal fees and printing costs. These “syndication fees” are capital expenses that cannot be depreciated or amortized.


These are organizational costs

Organizational costs include the following fees.
Legal fees for services incident to the organization of the partnership, such as negotiation and preparation of the partnership agreement.

Accounting fees for services incident to the organization of the partnership.

Filing fees.


Is the $5,000 expensing with respect to organizational costs and start-up costs for both.

Business start-up and organizational costs are generally capital expenditures. However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 20

Both, so $10,000 and they must be $50K or under, anything over that and the $5,000 is reduced by the amount over $50K (i.e, 52,000 = 5000-2000 or $3,000 of costs.


If you liabilities decrease what happens to basis

Goes down


Is depreciation a step stated item

No but 179 is