Jump to content
ATX Community

Partnership interest acquired


jrjames
 Share

Recommended Posts

There is a 50/50 partenrship AB and before the addition of Partner C the equity was:

Partner A: 20,000

Partner B 20,000

Partner C was given a 30% share with no money put in and now it is

Parnter A 50%

Parnter B 20%

Partner C 30%

Questions:

1. Should partner C recognize income of 12,000 and if so how would it be reported and on what form and is it subject to SE tax

2. If partner C recognizes income does she now have basis in the partnership

3. If partner C recognizes income would partner B recognize loss or an expense and how and on what form would it be reported.

Thanks for considering my questions.

Link to comment
Share on other sites

Results are all about detail facts. Did the new partner receive a percent of ownership of current assets (equity ownership) or is it a percent of future profits (income ownership). What were the intent of the parties, is there a written agreement? Did the new partner receive the ownership for work previously performed, ie: bonus for work? To many variables to determine just from your post.

Link to comment
Share on other sites

Thanks for your reply. The new partner has an equity ownership of 30%. There was no past work performed. The intent of the parties was for the new partner to perform services for the equity acquired although there is no written agreement.

Gee, I thought that there was supposed to be partnership agreement to refer to when allocating, income expense etc. Maybe they should think about having one drawn up? lbb

Link to comment
Share on other sites

The new partner has an equity ownership of 30%.

I would refer you to the 2009 Small Business Quickfinder Handbook, page B-7, that summarizes such partnership situation. If the new partner is receiving a "Capital Interest" of ownership of prior capital, the value is taxable as compensation to the new partner and deductible as a guaranteed payment for the partnership. [Reg § 1.721-1( b )] If the new partner is receiving a profits interest in exchange for services it is generally not a taxable event (with exceptions, see Handbook) [Rev. Proc. 93-27]

Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Restore formatting

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
 Share

  • Recently Browsing   0 members

    • No registered users viewing this page.
×
×
  • Create New...