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Tax Aspects of Partnerships
Finance & Accounting
Pages 5 (1255 words)
[ your name ] [ Professor’s name ] [ Course name / number ] [Publish Date] Tax Aspects of Partnerships Taxation law regarding partnerships in the United States tends to treat partnerships as flow through entities. Consequently, the entity in itself is not liable to tax payments but instead, the owners of the entity are liable to taxation depending on their ownership of the subject entity1 2.
This paper will explore the various dimensions of taxation as applied to partnerships in the United States. The material in this paper is not intended as a treatise but rather as a brief explanation of the matter only. The major rules dealing with taxation in partnerships are enshrined in the United States Internal Revenue Code under Chapter 1, sub Chapter K. However, the application of K-1 rules is subservient to declarations of partnership under Form 1065 that documents the various transactions of the partnership entity4. The aim of the method is to ensure that the declarations of income and transaction presented by the entity in question are verifiable against the partners’ declarations. Individually, the partners are provided with K-1 schedules that they need to fill out on their own to report their personal income levels. However, this is far easier said than done since the partners may be involved in more than one entity and it may not be simple to segregate incomes from various entities among other problems. The first step in calculating applicable taxes is to measure the income attributable to the overall partnership5 and then for this income to be segregated as per the various partners. ...
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