Chapter 15

Chapter 15 - 291 Chapter 15 Partnerships and S Corporations...

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© 2010 CCH. All Rights Reserved. Chapter 15 291 Chapter 15 Partnerships and S Corporations Highlights of 2010 Tax Changes No signi f cant tax law changes occurred for 2010. Teaching Suggestions To help students understand the taxation of different business entities, discuss the similarities and differences between partnerships, S corporations, and C corporations. Discussion should include: Conduit principle (1) Double taxation (2) Dividends received deduction (3) Charitable contributions (4) Distributions/withdrawals (5) Operating losses (6) Solutions to Questions and Problems ¶1502. 1. Question Answer a. What tax form must be used by a partnership? 1065 b. Do partnerships withhold income taxes on guaranteed payments paid to partners? No c. An LLC is what type of tax entity? * d. What is the extended due date for a calendar year partnership? Sept. 15 e. A partnership return for a f scal year ending April 30 is due on or before what date? August 15 * Partnership or C corporation—entity chooses by “checking-the-box on its f rst tax return. Since A and D both have the same year end and together own a majority interest in ABCD, the partnership’s 2. required tax year is June 30. ¶1502.02. There is no majority group of partners, and the principal partners (E, G and H) do not share the same year end. 3. Therefore, the partnership’s required tax year must be determined using the least aggregate deferral method. ¶1502.02.
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292 Essentials of Federal Income Taxation Chapter 15 © 2010 CCH. All Rights Reserved. ¶1502.04. 4. Item Ordinary Income Separately Stated a. Rent received X b. Capital loss X c. Domestic dividend X d. Charitable contribution X e. Guaranteed payments X X f. Section 179 expense X g. Interest on a business loan X h. Membership fee X i. Municipal bond interest X j. Property taxes X Royal’s reportable partnership income is $34,000. She is required to report her share of partnership income 5. regardless of whether it is withdrawn from the partnership. ¶1502.01. b., c., d., and e. must be separately stated. Although d. (guaranteed payments) are deducted in arriving at 6. the partnership’s ordinary income, they are separately stated for each recipient partner on Schedule K (and Schedule K-1). ¶1502.04. a. No. The partnership cannot treat the contribution to State University as a deduction from income. Charitable 7. contributions are reported on Schedules K and K-1 with the expectation that each partner will report her share of partnership charitable contributions on her individual income tax returns. ¶1502.04. b. Each partner’s share of the taxable income shown in the partnership return is $25,250 [1/2 × ($47,500 + $3,000)]. ¶1502.05. c.
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This note was uploaded on 01/14/2012 for the course ECON 121 taught by Professor Mcdevitt during the Winter '10 term at UCLA.

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Chapter 15 - 291 Chapter 15 Partnerships and S Corporations...

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