Chapter 16 - Chapter 16 Definition of Partnership An unincorporated association with two or more persons who associate for a profit motive o For income

Chapter 16 - Chapter 16 Definition of Partnership An...

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Chapter 16 Definition of Partnership An unincorporated association with two or more persons who associate for a profit motive o For income tax purposes, partnerships are generally treated as pass-through entities, the partnership pays no taxes, and partnership income (loss) and separately stated items are allocated to each partner according to the partnership’s profit sharing agreement. o The partners receive separate K-1 schedules from the partnership. Each K-1 reports each partner’s share of the partnership net profit and separately reported income and expense items. Then partners report these items on their own 1040 tax returns. Tax Years Majority Interest Taxable Year: Partnerships are generally required to elect the same taxable year as their partners who represent a majority interest on the first day of the partnership’s first tax year Five Percenters’ Common Tax Year: If there is no majority interest taxable year, the

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