The partnership section of the Internal Revenue Code is arguably one of the most complicated. That complexity, and the reliability of tax software to properly handle it, can create many issues for you and your staff when processing your client's LLC and partnership tax returns. In this case study-based course, we discuss the common errors practitioners make on partnership tax returns that review staff often miss. The intent is to sharpen the skills of reviewers by examining four case studies and discussing issues where additional information from the client may be warranted and areas of tax law where proper treatment requires further analysis and information. Matters discussed include income, deductions, K-1 reporting, and K-2 and K-3 reporting.
Learning Objectives
When you complete this course, you will be able to: • Identify the mechanics of a partnership's tax return, including partner capital account calculations and permissible tax years.
• Determine the proper allocation of recourse liabilities among partners.
• Analyze the consequences of a new partner joining a partnership.
• Determine depreciation expense among the contributing and noncontributing partners under Section 704(c).
• Determine the value of assets with nonrecourse liabilities.
Major Topics
Common errors made involving the following: • Form 1065
• Schedules Kand K-1
• Schedules M-1 and M-2
• Calculating recourse and nonrecourse liabilities
• Partner inside and outside basis
• Partner's capital account analysis
• Sections 704(b), 704(c), 721, 722, 732(b), 734(b), 737, 743(b)
