Tax - Partnerships

Question 1

Profit allocation

Answer 1

It’s agreement’s silent regarding profit allocation, then divide equally.
– Not a relative to capital contributions

Question 2

Partnership income: guaranteed payment

Answer 2

Guaranteed payment is income to partner.

Interest in partnership is ordinary business income plus guaranteed payment.

Question 3

Share of capital/liabilities when sold to third person

Answer 3

When third person assumes interest and liabilities:

– Gain is ordinary income to original partner/seller
– Seller’s adjusted basis = their capital + share of liabilities
– Amounts realize = cash received + share of liability transferred
– Gain = amount realized – adjusted basis