ACC 410 - Zimmerman - UNLV - Exam #4 Notes
Chapter 11: Partnerships & Limited Liability Entities - 11/15/12 Lecture
Partnership Income / Transfer of Property
Partnership Income & Losses through to the Partners so there is NO Entity Level Taxation. You can transfer Property into a Partnership at any time with NO tax consequences. There is no 80% Rule!! Only exception to this would be:
Partner A contributes Property Partner B contributes Property
FMV $200,000 FMV $200,000
Adj. Basis $ 80,000 Adj. Basis $120,000
Then the Partnership DISTRIBUTES to Partner A the property contributed by Partner B, only THEN will you have tax consequences. The general rule is that there are NO tax consequences when a Partner receives NON-cash Property.
Four Different Types of Partnerships: Page 11-3 / 11-4
1. General Partnership (GP): The partners share profits & losses in some specified manner. In a GP, the partners have potential UN-limited liability.
2. Limited Partnership (LP): There are still General Partners, but any Partner who is NOT actively involved with making decisions or running the Partnership is a LIMITED Partner and these Limited Partners have Limited Liability. The Limited Partners can only be sued up to the extent of their investment in the Partnership and can lose nothing else.
3. Limited Liability Partnership (LLP): Partnership structure used in today's world. In the LLP all Partners have Limited Liability whether a General Partner or Limited Partner. You still have the classification of General and Limited because someone (General Partner/s) is designated to make decisions. The IRS wants to know for tax purposes.
Remember: Even with Limited Liability, a General Partner is still PERSONALLY liable for their OWN wrong doing. Arthur Anderson (2001/2002): All Partners lost their capital investment in AA, but not their personal holdings. The AA Partners SPECIFICALLY involved with Enron COULD be sued for their personal holdings.
4. Limited Liability Company
Partnership Income / Transfer of Property
Partnership Income & Losses through to the Partners so there is NO Entity Level Taxation. You can transfer Property into a Partnership at any time with NO tax consequences. There is no 80% Rule!! Only exception to this would be:
Partner A contributes Property Partner B contributes Property
FMV $200,000 FMV $200,000
Adj. Basis $ 80,000 Adj. Basis $120,000
Then the Partnership DISTRIBUTES to Partner A the property contributed by Partner B, only THEN will you have tax consequences. The general rule is that there are NO tax consequences when a Partner receives NON-cash Property.
Four Different Types of Partnerships: Page 11-3 / 11-4
1. General Partnership (GP): The partners share profits & losses in some specified manner. In a GP, the partners have potential UN-limited liability.
2. Limited Partnership (LP): There are still General Partners, but any Partner who is NOT actively involved with making decisions or running the Partnership is a LIMITED Partner and these Limited Partners have Limited Liability. The Limited Partners can only be sued up to the extent of their investment in the Partnership and can lose nothing else.
3. Limited Liability Partnership (LLP): Partnership structure used in today's world. In the LLP all Partners have Limited Liability whether a General Partner or Limited Partner. You still have the classification of General and Limited because someone (General Partner/s) is designated to make decisions. The IRS wants to know for tax purposes.
Remember: Even with Limited Liability, a General Partner is still PERSONALLY liable for their OWN wrong doing. Arthur Anderson (2001/2002): All Partners lost their capital investment in AA, but not their personal holdings. The AA Partners SPECIFICALLY involved with Enron COULD be sued for their personal holdings.
4. Limited Liability Company