Distributions and taxation - Part 1
| HelpRegister |
Distributions and taxation - Part 1 I keep thinking that if I could write
the perfect treatise on how partnerships are taxed and how withdrawals are
treated, that I could be done with the subject once and for all, and could
merely refer readers to that perfect treatise
. Alas, I fear it is not to be. Jerry
Dressel has written exceptional articles on the subject which can be found on
the NAIC web site, and still the questions keep pouring in. So I am going to,
once again, devote a couple of articles to the subject based on specific
questions received recently.
Readers can find more information on this subject
at..........
Basically, a partnership tax return is informational. No tax
is assessed at the partnership level. The information included in the return is
passed on to the government and the partners so that each member's share of
taxable income can be determined.
Club members (partners) are taxed on their share of the club's dividends, interest, and
capital gains, whether or not these income items are distributed to the
partners. Members are also allowed to claim a deduction for their share of
partnership expenses. Since there is a limitation on this type of deduction (at
the individual level), these expenses may not result in any benefit to an
individual partner.
Distributions made to partners, whether in total or partial
liquidation of the partnership interest, are not taxable to the partners unless
cash distributed is in excess of the partner's basis in the partnership. See the
following for more on partner's basis.
In the next article, we'll take up some specific examples
provided by questions from incredulous readers <g>.
|
|
||||||