Читать книгу Taxation Essentials of LLCs and Partnerships - Larry Tunnell - Страница 29

1 J.D. Rackmore received a Schedule K-1 from a partnership reporting the following items of income, gain, loss, and deduction for the current year:

Share of partnership ordinary income	$ 4,500
Capital gains (net)	1,500
Interest income	700
Charitable contributions	(1,000)

J.D., who does not itemize deductions, has no other investments in partnerships or other pass- through entities. By how much will her investment in this partnership increase her taxable income for the current year?

 $4,500.$6,000.$6,700.$5,700.

Other items may allow the partners to use a greater portion of expenses or losses incurred outside the partnership when preparing their tax returns. A partner with capital losses outside the partnership, for example, may be allowed to deduct some or all of these losses against his or her share of partnership capital gains. Partners with “excess” investment interest expense may be able to deduct some of this interest against investment income allocated from the partnership. Passive losses incurred outside the partnership may be deductible against passive income reported by the partnership. For corporate partners (that is, partners who are corporations), the dividends-received deduction may be increased by a portion of dividends received through the partnership.

Reflecting the numerous special provisions which must be considered when preparing the partners' individual tax returns, partnership income is reported to the partners in pieces, rather than as a single number labeled “partnership taxable income.” In essence, the partnership's taxable income is reported in three parts. The front page of Form 1065 reports those items of income and deduction that are not subject to special treatment on any partner's tax return. These items result in net partnership “ordinary business income (loss).” Note that although all of the items that make up partnership ordinary business income are ordinary (otherwise they would be subject to special treatment by the partners), there are some ordinary income items, such as interest income, which are specially treated and therefore not included in partnership “ordinary business income.” On page 4 of Form 1065 is Schedule K, which reports to the IRS both net partnership ordinary business income or loss (from page 1 of Form 1065), and the totals of each item of income, gain, loss, deduction, credit, and the like, which may be subject to special treatment on one or more of the partners' tax returns. Therefore, the partnership's actual total net income or loss is derived from Schedule K, rather than from page 1 of the Form 1065.

Finally, each line item on Schedule K is divided among the partners and reported to those partners on Schedule K-1s. Each partner receives a copy of his or her Schedule K-1 (an additional copy is attached to partnership tax return filed with the IRS) reporting his or her share of each of these items (net ordinary business income and each other item which may be subject to special treatment). From the K-1, each partner then determines how partnership activities affect his or her individual taxable income.