Partnership Income Taxes - Cpa

Front 1

Partnership tax forms

Back 1

1065 - informational return
Schedule K - information on income & other allocations for partnership
Schedule K-1 - information on income & allocations for individual partners

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Guaranteed salary to partner:
Definition?
Reporting for partnership?
Reporting for partner?

Back 2

Guaranteed salary is a set payment 1) for work that is done 2) regardless of whether the business is profitable

Reported as income to partner

Reported as an operating expense to partnership

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Operating loss of partnership: deductible to partner?

Back 3

Yes - limited to amount of partner's at-risk balance

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Partnership: calculation of partner's at-risk balance

Back 4

+ Partner's capital balance (investment + share of profits - distributions)
+ Loans to partnership
+ Ownership percentage of any partnership debts

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Contribution of property by partner to partnership: taxable gain/loss to partner?

Back 5

No - tax basis is transferred from partner to partnership

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Sale of property by partner to partnership: taxable gain/loss to partner?

Back 6

Yes if 50% or less owned by partner

If over 50% owned, gains are taxable but losses are not deductible (related party rule)

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Partnership interest received in exchange for services rendered: partner's basis in partnership interest?

Back 7

Fair market value of services rendered

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Sale of partnership interest: calculation of gain/loss to selling partner

Back 8

+ Amount received
+ Share of partnership liabilities assumed by buying partner
- Basis in partnership interest

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Sale of partnership interest: calculation of basis in partnership interest to buying partner

Back 9

+ Purchase price
+ Share of partnership liabilities assumed

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S Corporation: requirements

Back 10

Fewer than 100 owners
No owner can be a C Corporation

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S Corporation: calculation of at-risk balance for owner

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+ Capital balance (investment + share of profits - distributions)
+ Loans to corporation

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Calculation of original tax basis in partnership interest

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+ Money contributed
+ Adjusted basis of property contributed
+ Share of liabilities on other partners' contributions assumed by partner
- Share of liabilities on partner's contribution assumed by other partners

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Calculation of change in partnership interest

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+ Share of partnership net income (loss)
+ Share of separately stated income (loss) items
+ Share of increase (decrease) in partnership liabilities
+ Cash contributions (distributions)
+ Property contributions (distributions) at adjusted basis
+ Share of tax-exempt (non-deductible) partnership income (expenditures)

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Partnership is terminated for tax purposes when:

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1) 50% or greater of partnership interests are sold within a 12-month period, OR
2) Partnership discontinues operations for a 12-month period, OR
3) Partnership no longer has at least two partners

Front 15

S Corp election:
Who must consent?
When effective?

Back 15

All shareholders during tax year must consent

Effective in following tax year (unless elected within first 2-1/2 months of tax year, then effective in current tax year)

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Termination of S Corp status:
Who must consent?
When effective?

Back 16

Majority of shareholders must consent

Effective in following tax year (unless terminated within first 2-1/2 months of year, then effective in current tax year)