C when a partnership disposes of an asset contributed

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c.When a partnership disposes of an asset contributed by a partner, the built-in gain/loss at the time of contribution must be allocated to the partner who contributed the asset. Any remaining amount is allocated per the partnership profit/loss sharing agreement.2.Partner’s Basis and At-Risk Amount Limits Loss Deductibility a.A partner’s deduction of his pro-rata share of partnership losses is limited to his basis in the partnership at the end of the year in which the losses occurred.b.Any nondeductible portion is carried forward by the partner into future years and may be utilized when sufficient basis is restored.c.For individuals and certain closely held corporations, a partner’s deduction is further limited to the partner’s at-risk amount. At-risk amount = partner’s basis – partner’s share of nonrecourse debt (except qualified nonrecourse debt related to realty). Any nondeductible portion is carried forward and may be utilized when sufficient at-risk amount is restored.d.For individuals and certain closely held corporations, passive activity loss rules may apply too, after basis and at-risk rules.F.Transactions between Partners and Partnership1.Entity Theory: Partner May Transact with Partnership as if Outsider/Nonpartner6
2.Guaranteed Payments= Payments made by partnership to partner for services rendered or for use of capital without regard to partnership’s income for the year. Includes benefits such as partnership-paid health insurance. a.Generally Deductible by Partnership to Arrive at Ordinary Incomeb.Ordinary Income to Partner, ANDc.Subject to Self-Employment Tax since Partner Considered Self-Employed, NOT Employee, for Tax Purposesd.Reported to Partner on Schedule K-13.Sales of Property between Partners and Controlled (p owns > 50%) Partnershipsa.Losses are Disallowed (but will reduce future gain when property sold to unrelated party).b.Gains are Ordinary (unless property is capital asset in the hands of purchaser).G.Partner’s Qualified Business Income (QBI) Deduction (Sec. 199A) --- Beginning 2018 (TCJA - Tax Cuts and Jobs Act of 2017 Became Law December 22, 2017)1. Applies to Pass-Through Entities (PTEs) --- Sole Proprietorships, Partners in Partnerships/LLPs/LLCs, Shareholders in S Corporations, and Estates & Trusts2. Deduction = Lesser of:a. 20% x Qualified Business Income (QBI), orb. * Greater of (1) Wage Limitation or (2) Property Limitation(1) 50% x Business W-2 Wages(2) 25% x Business W-2 Wages + 2.5% x Unadjusted Basis of Business Tangible Depreciable Property (Buildings/Equipment, Not Land) Used in Business, Owned at End of Year, and Within Depreciable Period (But Not Less than 10 Years)* Limitations Ignored if Individual’s Taxable Income is $157,500 or Less ($315,000 MFJ). If Taxable Income Exceeds the $157,500 by $50,000 orMore ($100,000 MFJ) the Full Limitations Apply. Between $157,500 and $207,500 ($315,000-$415,000 MFJ), the Limitations Reduction is Prorated. 7
QBI = Ordinary Net Income Allocated to Owner. Includes Rental Income.

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