ch17 Partnerships and S Corporations.ppt

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 Corporation’s shareholders
Types Of Flow-through Entities
Partnerships
S corporations
Limited panies(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 e, 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 e, 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 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
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 anizational & 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 s