We have four members in our Partnership as follows:

Member 1: Father (of daughter)
Member 2: Daughter (of father)
Member 3: Daughter-In-Law (wife of father's son)
Member 4: Daughter-In-Law (wife of father's son)

For purposes of completing the tax interview questions in
Bivio, in order to complete Schedule B & B-1, are all the
members above considered related, or just the father &
daughter? It will affect the percentage of constructive
ownership. Right now I have checked that we are all related
and as a result, Schedule B-1 Part II indicates the maximum
% owned in profit, loss, or capital is 100.0% for each
member -- is this correct? Or if just the father & daughter
need to be checked as being related, will the percentages
for the daughter-in-laws reflect only their direct ownership
percentage and won't include any family attribution?

The instructions for Form 1065 say ... "The family of an individual includes
only that individual's spouse, brothers, sisters, ancestors, and lineal
descendants."
    http://www.irs.gov/instructions/i1065/ch02.html#d0e3463

In your example, that says to me that just the father and daughter are
related for these purposes. The ownership percentage of the father and
daughter will be combined and that total percentage (if 50% or more) will be
reported on Schedule B-1 as the ownership percentage for each of them. For
example, if the father owns 30% and the daughter owns 20% Schedule B-1 would
show each of them as owning 50%.

-Jim Thomas

----- Original Message -----
From: "Terri L. Anderson" <imtearbear@bivio.com>
To: <club_cafe@bivio.com>
Sent: Saturday, February 13, 2010 1:00 PM
Subject: club_cafe: Schedule B & B-1 Determing % of Profit, Loss or Capital


> We have four members in our Partnership as follows:
> Member 1: Father (of daughter)
> Member 2: Daughter (of father)
> Member 3: Daughter-In-Law (wife of father's son)
> Member 4: Daughter-In-Law (wife of father's son)

> For purposes of completing the tax interview questions in Bivio, in order
> to complete Schedule B & B-1, are all the members above considered
> related, or just the father & daughter?

Keep in mind that if either daughter-in-law lives in a
community property state, (and assuming no pre-nup
agreement) the husbands of the daughters-in law would own an
undivided one-half interest in the daughter-in-laws'
interest in the partnership. The sons would have a
relationship with the father.

The take away is to apply the ownership laws of the state
where the partner lives first; then apply the tax law to the
resulting ownership interests.

Jack Ranby, Treasurer
Grants Partners Investment Club
Phoenix AZ (a community property state)

iras1 wrote:
> Father and daughter each have constructive ownership of each others interest. The daughters-in-law are neither direct descendants of father or daughter nor siblings of father or daughter so they don't contribute to constructive ownership. (assuming there are no other relationships among these four)
> &nbsp;
>
>
>, imtearbear@bivio.com writes:
>
> We have four members in our Partnership as follows:
>
> Member 1: &nbsp;Father (of daughter)
> Member 2: &nbsp;Daughter (of father)
> Member 3: &nbsp;Daughter-In-Law (wife of father's son)
> Member 4: &nbsp;Daughter-In-Law (wife of father's son)
>
> For purposes of completing the tax interview questions in
> Bivio, in order to complete Schedule B &amp; B-1, are all the
> members above considered related, or just the father &amp;
> daughter? &nbsp;It will affect the percentage of constructive
> ownership. &nbsp;Right now I have checked that we are all related
> and as a result, Schedule B-1 Part II indicates the maximum
> % owned in profit, loss, or capital is 100.0% for each
> member -- is this correct? &nbsp;Or if just the father &amp; daughter
> need to be checked as being related, will the percentages
> for the daughter-in-laws reflect only their direct ownership
> percentage and won't include any family attribution?
>
> &nbsp;
> &nbsp;