ch11tax1 - Taxation of Business Entities Chapter11...

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Chapter 11 Partnerships and Limited Liability Entities Taxation of Business Entities
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C11 - 2 Outline Definition of a Partnership Entities taxed as a Partnership Partnership Reporting and Taxation Partners’ Basis in Partnership Interest Loss Limitations Transactions between Partners and Partnership
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C11 - 3 Overview of Partnership Taxation A partnership is a flow-through entity A partnership is NOT a separate taxable entity. Partnership income is taxed only at one level. Income of the partnership is reported by the partners, regardless of the amount distributed by the entity. The partnership files a tax return to provide information to IRS and to partners (K-1s) about amounts to be reported by partners.
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C11 - 4 Some Advantages of Partnerships Greater flexibility in allocating income (losses) to partners than with S Corps. One major disadvantage compared to an S Corp is that partnership ordinary income IS considered “self-employment” income for general partners. No recognition of income when appreciated assets are distributed to owners. Unrealized appreciation must be recognized by a corporation on distributions to owners. No recognition of income when a partner contributes appreciated assets to a partnership.
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C11 - 5 Partnership Definition An association of two or more persons to carry on a trade or business. Contribute money, property, labor Expect to share in profit and losses For tax purposes, includes: Syndicate Group Pool Joint venture, etc Entity can not be a corporation, estate, or trust. Must have at least 2 partners. Recall, that an eligible entity can “check the box” to be taxed as a partnership or corporation.
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C11 - 6 Entities Taxed As Partnerships General Partnership Consists of at least 2 partners Partners are jointly and severally liable Creditors can collect from both partnership and
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This note was uploaded on 08/25/2010 for the course TAX 4001 taught by Professor Hampton,m during the Fall '08 term at University of Central Florida.

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ch11tax1 - Taxation of Business Entities Chapter11...

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