ACC 410 - Zimmerman - UNLV - Exam #4 Notes

Net capital loss carryovers but not carrybacks are deductible against capital gains in determining a corporation 's net operating loss for the year.
True

Whether certain allocations of partnership income, gain, loss, deductions, and credits have substantial economic effect and whether that has any impact on the partners’ distributive shares.

When it comes to partnerships Alex, Bill, Carl, and Devon will have two options- a general partnership or a limited partnership. Partnerships are beginning to be a business form of the past. Once upon a time, partnerships were “the default form of business and provided the benefit of pass-through taxation, but lacked the important feature of limited liability” (Chrisman, 2010, p. 465). In a general partnership, each partner associated with the entity will be held liable for their own business decisions as well as

- Spouse A’s partnership share of income is reported because in a partnership the partners are to report their share of their business on their individual return.

Once a gain or loss is recognized, a taxpayer must determine how the recognized gain or loss affects the taxpayer’s tax liability. The character depends on a combination of two factors: purpose or use of the asset and holding period. The purpose or use of the asset is important because the law does not treat all assets equally. The general use categories are: (1) trade or business, (2) for the production of income (rental activities), (3) investment, and (4) personal. Based on these criteria, we can categorize an asset into one of three groups: (1) ordinary, (2) capital, or (3) section 1231. Characterizing the gain or loss is important because all gains and losses are not equal. Ordinary gains and losses are taxed at ordinary income rates, regardless of the holding

Partnerships use form 1065 to report income and losses, but taxes are not collected or paid from it, instead, the partners pay the taxes on their own personal tax returns. Each partner is allocated their share of the income/loss according to the partnership agreement. This is done through a schedule K-1. In this case, Spouse A will report $142,000 as income on the couple’s 1040. The couple will not be taxed on the cash withdrawal of $83,500, since partners are not taxed when they receive a withdrawal or distribution, unless it exceeded the partner’s basis.

Partner’s Share of Income, Deductions, ▶ See back of form and separate instructions. Credits, etc.

The payments are all part of a liquidating distribution. According to the text, a liquidation distribution is a single distribution or one of a planned series of distributions that terminates a partner's entire interest in the partnership. Current distributions are all other distributions including those that substantially reduce a partner's interest in the partnership.

Drafters of the Internal Revenue Code provided adjustments to the basis of partnership property as a consequence to the sale or exchange of a partnership interest, including transfer of such an interest on the death of a partner provided the partnership made an election or the partnership has a substantial built-in loss. Absent a basis adjustment, the incoming/transferee partner will be taxed on the same gain when realized by the partnership if the interest transferred had appreciated. The selling/transferor partner will recognize gain the sale regardless of consequences to the remaining partners and partnership. Likewise if the partnership interest depreciated, the transferor partner would recognize a loss on the sale, and the

The gross estate under a consideration furnished property will include the portion of the fair market value as of the date of death attributable to the consideration of the decedent. The law assumes the decedent co-owner contributed full consideration for the property. The estate absorbs the burden of establishing the surviving co-owners contributed to the acquisition of the property. It is not a difficult task for the estate and it is rare for the IRS to challenge the contributions of the co-owners to acquire the property and establish the joint tenancy as a tax avoidance scheme without motive to avoid taxes or make gifts and each of the co-owners had existing substantial resources to contribute accordingly.

Under the rules found in section 708, a partnership may terminate for federal tax purposes but continue legally. To constitute as a technical termination, an exchange of 50% or more of the interests in capital gains and profits must occur within 12 months. Once terminated, the partnerships’ assets and liabilities are viewed as having transferred to the new partnership in exchange for an interest in it. Immediately after, the ceased partnership is regarded as having dealt its newly acquired interests to the purchasing partner and the remaining partners. Say for example, if Jack and Jill each contribute 20,000 to form a partnership and a few years later Jack decides to sell his entire 50% stake to Jenny for 30,000, Jack and Jill are now seen

Amy, a U.S. citizen, will be subject to taxation in both the Czech Republic and the United States. She has to report her share of the foreign partnership income, gains, losses, deductions, and credits on her U.S. tax return. However, Amy can claim a foreign tax credit and report her distributive share of foreign taxes paid or accrued. Her status as a resident of the U.S. will not be affected by her involvement in the foreign partnership, and she will not be subject to any withholdings.

To explore the topic of the tax consequences of when a member of limited liability company (LLC) treated as a partnership for tax purposes guarantees a qualified nonrecourse financing of the LLC, we will need to examine how a liability or taxpayer could be at-risk, what are the tax consequences of when a taxpayer with limited liability guarantees a debt,

If under these conditions as a partnership, operating income will be taxed only once, so

When formatted as a partnership, a business’s revenues and expenses are passed to each partner directly to avoid double taxation. A corporation, however, will have its recognized revenues and expenses taxed before profits or losses are passed to the owners, who will then have their income taxed on a personal level (Hoyle, 2014, 630). A partnership will see a decrease in each partner’s cash assets as well as the possible liquidation of non-cash assets to pay for the damages that do occur. The decrease in the partners’ capital will reflect on the financial statements.