Chapter 9Partnership Formation and Operation.ppt

Chapter 9:Partnership Formation and Operation PARTNERSHIP FORMATION OPERATION (1 of 2) Partnership definitions Overview of partnership taxation Contributions of Property Partnership elections Ordinary income/loss vs. separately stated items Partners’ distributive share of items PARTNERSHIP FORMATION OPERATION (2 of 2) Special allocations Partner’s basis in partnership interest Special loss limitations Guaranteed payments Transactions between partner partnership Family partnerships Partnership Definitions(1 of 5) Tax definition of a partnership Syndicate, group, pool, joint venture or other unincorporated organization that carries on a business Partnership Definitions(2 of 5) General partnership Two or more partners All partners are general partners May participate in mgmt May make commitments on behalf of partnership Unlimited liability for partnership debts Partnership Definitions(3 of 5) Limited partnership One or more general partners and One of more limited partners Cannot participate in management Cannot make commitments for partnership Liability generally limited to amount invested in partnership Partnership Definitions(4 of 5) Limited liability companies (LLCs) May be taxed as a partnership or a corp (using check-the-box regs) Allows entity to obtain flow-through and flexibility of partnership allocations while maintaining limited liability of a corp. Partnership Definitions(5 of 5) Limited liability partnerships(LLPs) Used by many professional organizations May be taxed as a partnership or a corp (using check-the-box regs) Partners not liable for failures in work of other partners or people supervised by other partners Electing large partnership (ELP) Non-service partnerships w/ ?100 ptrs Overview of Partnership Taxation Partnership profits and losses Partner’s Basis Partnership distributions Partnership Profits and Losses (1 of 2) Partnership files Form 1065 Information return with no tax due Partners receive a Form K-1 Reports pa