Partnership Taxation

This project covers general partnership basis issues including computation of partners’ adjusted basis, determination of current-year tax position, preparation of tax forms, and creation of a memo to the partners with an analysis of their current-year tax issues and changes to basis.

In the current year, Mary, Andrew, and Paul formed Venezia General Partnership. Mary contributed $55,000 cash, Andrew contributed $55,000, and Paul contributed land with a cash basis of $70,000 and a fair market value of $180,000. The partnership assumed a $70,000 mortgage on the land; no partner is personally liable for the mortgage. At the end of the current year, Venezia made a $7,000 payment on the mortgage. Mary, Andrew, and Paul will split all profits and losses equally.

Current-year operations had the following results:

• Sales      revenue: $260,000
• Cost      of goods sold: $205,000
• Operating      expenses: $35,000
• Long-term      capital gains: $1,200
• Section      1231 Gains: $450
• Charitable      contributions: $350
• Municipal      bond interest: $150
• Salary      paid as a guaranteed payment to Andrew (not included in expense): $1,500

Part A: Determine Basis

1. Using      Thomson Reuters, find a court case discussing partners’ basis in the      partnership interest. Summarize the court case and tax law relating to      basis calculations.
2. Using      the information summarized, determine Mary’s, Andrew’s, and Paul’s initial      basis in the partnership interest and the basis for each partner at the      end of the current year. These calculations should be 1 page.

Part A Submission Requirements:

• Your      summary of the court case, summary of tax law relating to basis      calculations, and the specified partners’ basis calculations should be 5      pages not including the required cover and reference pages. Note, the      basis calculations should not be more than 1 page.
• Support      your paper with at least 6 scholarly, legislative, or court references (of      which the textbook may be one). 
• Format      your paper according to the APA format

Part B: Tax Form Preparation

1. Prepare      Schedule K for the current year from page 4 of Form 1065.
2. Prepare      Andrew’s Schedule K-1.

Part B Submission Requirements:

• The      tax forms required for Part B should be submitted as PDF documents.

Part C: Client Letter

Prepare a letter to Andrew summarizing her current year tax issues.

Part C Submission Requirements:

• Your      letter should be 3 pages not including the required cover and reference      pages.
• Support      your paper with at least 6 scholarly, legislative, or court references (of      which the textbook may be one). 

Your submission should be 10 pages in length and conform to the APA format. Include at least 8 scholarly references in addition to the course textbook.  

chapters 27 & 28 in South-Western Federal Taxation 2019

Imposition of Tax, 26 U.S. Code § 641

Imposition of Tax, 26 U.S. Code § 2501

McCormick, P. (2017). Key estate planning concepts for international clients. Estate Planning, 44(6), 18-21.

Saylor, T. (2017, April). How to avoid inheritance mistakes. Journal of Accountancy. Retrieved from https://www.journalofaccountancy.com/newsletters/2017/apr/avoid-inheritance-mistakes.html

IRS.gov. (2018a). Definition of a trust. Internal Revenue Service. Retrieved from https://www.irs.gov/charities-non-profits/definition-of-a-trust

IRS.gov. (2018b). Estate tax. Internal Revenue Service. Retrieved from https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax

Tax Cuts and Jobs Act of 2017, Pub. L. 115-97. (2017). Retrieved from https://www.congress.gov/115/bills/hr1/BILLS-115hr1enr.pdf

Vanguard. (2018, February 26). Tax and estate planning in a changing environment: The new rules’ effect on estate and gift taxes. [Video file]. Retrieved from: https://youtu.be/3gL1TyD0xJ4