3.3 Partnership Information Return

1. Pass-thru & Form 1065

1) Separate line items: Schedule K -> K-1
(1) Charitable contributions
(2) Capital/Sec.1231 gain and loss
(3) Net income (loss) from rental activity
(4) Interest and dividend income
(5) Sec179 expense deduction
(6) Investment interest expense
(7) Partner's health insurance premiums
(8) Keogh (retirement) plan contribution for partners
(9) Tax credits
(10) Foreign income tax
* Guaranteed payments to partners
* Ordinary business income/loss

2) Other: Form 1065 Page 1

2. Guaranteed Payments

(1) Partnership: tax deduction
(2) Partner: taxable income - Form 1040 Schedule E (Schedule SE)

1) Payments not guaranteed: distribution
2) Fringe benefits: partnership: tax deduction, partner: taxable income

3. Organizational Expenditures

Organizational expenditure: first $5,000 to be expensed and the remainder is amortized over 180 months

(1) Included costs
The filing fee, accounting fees for establishing the initial accounting system, and legal fees for negotiating and preparing partnership agreements

(2) Excluded costs
Expenditures connected with issuing and marketing of interests in the partnership (e.g. offering materials) (syndication cost)

4. Distributive Share

1) Distributive share: the partnership agreement

2) Special allocation - Sec. 704
Precontribution gain or loss must be allocated to the contributed partner

5. Partners' Tax Reporting

1) K-1 to Form 1040
K-1 line 1: ordinary business income (loss) -> Schedule E (passive or nonpassive)
K-1 line 5&6: Interest and dividends -> Schedule B
K-1 line 8&9: Capital gain (loss) -> Schedule D
K-1 line 13: Other deductions: charitable contribution -> Schedule A

2) Reporting partnership losses: loss limitation
(1) Limited to basis / "At-Risk" basis
(2) Carryforward of losses indefinitely
(3) Passive activity loss limitation (if not materially participate)
(4) Excess business loss limitation: $250,000/$500,000

6. Taxable Year of Partnership

1) Calendar year (Generally required)
2) Fiscal year: maximum three-month deferral