AC 750 Chapters 20 and 21

AC 750 Chapters 20 and 21 - Chapters 20 & 21...

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Partnerships
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AC 750 - Chapters 20 and 21 2 What is a partnership? 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 Types:  General, Limited, Limited Liability (LLP), Publically Traded LLC   can elect to be treated as a partnership or corporation for federal tax purposes Equity Interest – capital account for book purposes  Profit-loss Sharing Ratio: - usually in partnership agreement        - can be changed        - default is the equity interest ratio
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AC 750 - Chapters 20 and 21 3 Forming a Partnership - §721 Contributions could be property, cash, services or combination of the two Generally, neither the partner nor partnership recognize gain or loss – even if boot  is received! No control requirement! Partner’s interest =  AB property + cash transferred - liability assumed The asset contributed keeps it’s AB to the partnership          Inside vs. Outside Basis                Inside Basis ≠ Capital Account              Outside  Basis ≠ Capital Account
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AC 750 - Chapters 20 and 21 4 Contribution of Services For a capital interest:  the partner has ordinary income to the extent of the  FMV of services.   That is also the basis of the partnership interest. For future profits:  Only recognizes income to the extent of his share of  future profits.  There is no immediate income and the basis in the  partnership interest is zero.
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This note was uploaded on 03/19/2012 for the course ACC 750 taught by Professor Tracynoga during the Spring '12 term at Bentley.

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AC 750 Chapters 20 and 21 - Chapters 20 & 21...

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