Chapter 3 Slides - Agenda \u2022 Homework \u2022 Partnership Operations \u2013 Reporting Partner Income \u2013 Partnership Taxable Years \u2022 Capital Accounts

Chapter 3 Slides - Agenda u2022 Homework u2022...

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1 Agenda 1/30/2014 Homework Partnership Operations Reporting Partner Income Partnership Taxable Years Capital Accounts Substantial Economic Effect Intro
2 Homework
3 Partnership Operations
4 Reporting Partner Income Sec. 706. Taxable years of partner and partnership. (a) Year in which partnership income is includible. In computing the taxable income of a partner for a taxable year, the inclusions required by section 702 and section 707(c) with respect to a partnership shall be based on the income, gain, loss, deduction, or credit of the partnership for any taxable year of the partnership ending within or with the taxable year of the partner.
5 Reporting Partner Income Sec. 706(a). Taxable years of partner and partnership. Translation: A partner must include income from the partnership tax year that ends during the partner’s tax year.
6 Example 1. Stewie is a 50% partner in the SB partnership. Both Stewie and SB use a calendar year tax year. In Yr1, Stewie had wages of $100. SB had ordinary income of $120. Reporting Partner Income Stewie 50% 50% Brian SB What income must Stewie report on his Yr1 tax return?
7 Reporting Partner Income Example 1 Result: Stewie must report his wages from Yr1 and his share of SB income for the SB tax year ended 12/31/Yr1. Wages 100 Distributive Share of SB Income 60 Total Reportable Income 160
8 Example 1A Same facts as Ex 1 but SB uses a 1/31 tax year. In Yr1, Stewie earned wages of $100 and SB had OI of $100 for its year ended 1/31/Yr1. In Yr2, Stewie had wages of $120 and SB had OI of $180 for its year ended 1/31/Yr2. . Reporting Partner Income Stewie 50% 50% Brian SB What income must Stewie report on his Yr1 and Yr2 tax return?
9 Reporting Partner Income Example 1A Result : Stewie must report his wages from Yr1 and, under section 706(a) his share of SB income for the SB tax year ended 1/31/Yr1. Wages 100 Distributive Share of SB Income 50 Total Reportable Income 150
10 Reporting Partner Income Example 1A Result : Stewie must report his wages from Yr2 and, under section 706(a) his share of SB income for the SB tax year ended 1/31/Yr2. Wages 120 Distributive Share of SB Income 90 Total Reportable Income 210
11 Partnership Taxable Years Sec. 706. Taxable years of partner and partnership…. (b) Taxable year.

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