Chapter 17 Partnerships and S Corporations
Chapter 17 Partnerships and S Corporations
Learning Objectives Determine the tax implications of a partnership formation Apply the operating rules for partnerships Understand the tax implications (to the partnership and its partners )of distributions to partners Understand the requirements for electing and maintaining S Corporation status Apply the operating rules for S Corporations Determine tax treatment of an s corporations shareholders
Learning Objectives • Determine the tax implications of a partnership formation • Apply the operating rules for partnerships • Understand the tax implications (to the partnership and its partners) of distributions to partners • Understand the requirements for electing and maintaining S Corporation status • Apply the operating rules for S Corporations • Determine tax treatment of an S Corporation’s shareholders
Types Of Flow-through Entities Partnerships s corporations Limited liability companies(LLC) Limited liability partnerships(LLP)
Types Of Flow-through Entities • Partnerships • S corporations • Limited liability companies(LLC) • Limited liability partnerships(LLP)
Flow-through Entities Entail taxation, only at the ownership level. This single level of taxation, is achieved by: (1)exempting the entity from taxation (2)passing income, deductions, losses, and credit through to the owners, and (3 )adjusting the basis of the owners'interest in the entity
Flow-through Entities: • Entail taxation, only at the ownership level. This single level of taxation, is achieved by: – (1) exempting the entity from taxation – (2) passing income, deductions, losses, and credit through to the owners, and – (3) adjusting the basis of the owners’ interest in the entity
Taxation Of Partnerships Formation of a partnership Partnership operations Special allocations Allocation of partnership income, deductions, losses and credits to partners Basis adjustments for operating items
Taxation Of Partnerships • Formation of a partnership • Partnership operations • Special allocations • Allocation of partnership income, deductions, losses, and credits to partners • Basis adjustments for operating items
Taxation Of Partnerships Limitations on losses and restoration of basis Transactions between a partner and the partnershi p Sale or exchanges between a partner and partnership Guaranteed payments Partnership distributions Sale of a partnership interest Large partnership election
Taxation Of Partnerships • Limitations on losses and restoration of basis • Transactions between a partner and the partnership – Sale or exchanges between a partner and partnership – Guaranteed payments • Partnership distributions • Sale of a partnership interest • Large partnership election
Formation Of A Partnership · In exchange for property and/or services, partners receive an interest A partnership interest is an investment security similar to corporate stock
Formation Of A Partnership • In exchange for property and/or services, partners receive an interest • A partnership interest is an investment security similar to corporate stock
Formation Of A Partnership Section 721: non-recognition rules Basis of a partnership interest Section 752 adjustment Negative basis rule Holding period for a partnership interest Basis of partnership assets Financial accounting considerations Organizational syndication fees
Formation Of A Partnership • Section 721: non-recognition rules • Basis of a partnership interest • Section 752 adjustment • Negative basis rule • Holding period for a partnership interest • Basis of partnership assets • Financial accounting considerations • Organizational & syndication fees
Operating Rules For Partnerships Certain items are passed through to partners without losing their identity These should be separately stated due to each partner's different tax situation Items that do not have special tax effect are netted at the partnership level and the 'esults are ordinary income or loss, then allocated to partners based on agreement
Operating Rules For Partnerships • Certain items are passed through to partners without losing their identity – These should be separately stated due to each partner’s different tax situation • Items that do not have special tax effect are netted at the partnership level and the results are ordinary income or loss, then allocated to partners based on agreement
Partnership Elections Tax year restrictions Cash method of accounting restrictions 备备 民F MIsteli 打装! JE. 江到非
Partnership Elections • Tax year restrictions • Cash method of accounting restrictions