a and b, both calendar year noncorporate taxpayers, are equal partners in the ab partnership, which had the following income and expenses during its (business purpose) taxable year that ended

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09-12-2022
Business

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a and b, both calendar year noncorporate taxpayers, are equal partners in the ab partnership, which had the following income and expenses during its (business purpose) taxable year that ended

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pragyavermav1 pragyavermav1 · Answer 1 · 2022-12-16T02:16:46-05:00

a. 'Partnership' is not liable for tax payment instead the individual partners are liable for the payment of tax through their individual tax returns (Income or loss should be appropriately valued) of the following tax year. 'Form 1065' is to be done with the IRS which evaluates the proper result of the partnership profits & losses or Incomes&Expenses and Schedule- K which evaluates the individual tax returns of the partner.

b. Even though it's the first year, tax returns should be obviously filed even though the accounting period does not end in that year. Double taxation is avoided by filing appropriate schedules and forms. The interest is treated as ordinary income and charged for tax returns of the individual interest account.

c.If the partnership distributed cash to each partner i.e $20000 it is affected individuals in their capital accounts and gain or loss should be determined and as per that the tax returns are filed which will indirectly also affects the partnership tax returns. No differences occur regarding the type of payment to the partners by the partnership but with the exception referred to in the Internal Revenue Service norms.

d. If A had sold it individually he should file it as a capital gain as it is an asset of the firm which is often termed a capital asset and tax consequences occur while filing the return to the partnership and the partner selling the asset will not be affected. So, it matters differently to the partner and partnership.

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