c20 - Chapter 20 Forming and Operating Partnerships...

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Chapter 20 Forming and Operating Partnerships INSTRUCTOR’S MANUAL Learning Objectives 1. Determine whether a flow-through entity is taxed as a partnership or S corporation, and distinguish the entity approach from the aggregate approach for taxing partnerships. 2. Resolve tax issues applicable to partnership formations and other acquisitions of partnership interests, including gain recognition to partners and tax basis for partners and partnerships. 3. Determine the appropriate accounting periods and methods for partnerships. 4. Calculate and characterize a partnership’s ordinary business income or loss and its separately stated items, and demonstrate how to report these items to partners. 5. Explain the implications of a partner’s tax basis and the adjustments that affect it. 6. Apply the basis, at-risk and passive activity loss limits to losses from partnerships. Teaching Suggestions This chapter provides an overview of partnership formations and operations. In the formations area, the chapter focuses on the tax consequences to partners and partnerships when partners contribute either property or services in exchange for a partnership interest. As part of this analysis, the chapter discusses general principles regarding partnership debt allocation. In the operations area, the chapter covers separately stated items and tax reporting, self-employment issues affecting partners, partner basis adjustments, and limitations on tax losses from partnerships. The chapter is written in such a way that instructors who prefer to cover only formations or only operations can do so. We recommend one of two possible approaches when covering this chapter. First, you might consider discussing the Entities Overview chapter first as a general introduction to the taxation of flow-through entities, and then follow it with a discussion of this chapter and possibly the chapter that follows on S corporations. Alternatively, you might begin a module on flow-through entities with this chapter, followed by the next chapter on S corporations, and ending with the Entities Overview chapter to highlight important differences between partnerships and S corporations. Of all the topics included in the chapter, students tend to have the most difficulty with partnership debt allocation, and the tax basis, the at-risk, and the passive activity loss limitations. These areas are likely to require more time in the classroom relative to other topics in the chapter. Two comprehensive partnership tax return problems are included in Appendix C for those instructors that want to emphasize the tax compliance requirements of operating a partnership.
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Assignment Matrix Learning Objectives Text Feature Difficulty LO1 LO2 LO3 LO4 LO5 LO6 Research Planning Tax Forms DQ20-1 10 min. Easy X DQ20-2 10 min. Easy X DQ20-3 10 min. Easy X DQ20-4 10 min. Easy X DQ20-5 10 min. Easy X DQ20-6 10 min. Easy X DQ20-7 10 min. Easy X DQ20-8 10 min. Easy X DQ20-9 10 min. Easy X DQ20-10 10 min. Easy X DQ20-11 10 min. Easy X DQ20-12 10 min. Easy X DQ20-13 10 min. Easy X DQ20-14 10 min. Easy X DQ20-15 10 min.
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