General Partnership tax question

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
McDuff10
Posts: 23
Joined: Mon Aug 03, 2015 12:19 am

General Partnership tax question

Post by McDuff10 »

Have any of you ever heard of a scenario where a general partner exiting a partnership has to file amended tax returns to repay previous losses that were reported on previous year's tax returns? Thanks for time.
Two Headed Mule
Posts: 334
Joined: Sat Mar 28, 2009 8:38 am
Location: Brooklyn, New York

Re: General Partnership tax question

Post by Two Headed Mule »

Can you describe the circumstances more specifically? Filing amended returns would be warranted where the partnership items for the prior years were incorrect (and the partnership is not a TEFRA partnership), but I suspect you are alluding to something else.

Mule
Topic Author
McDuff10
Posts: 23
Joined: Mon Aug 03, 2015 12:19 am

Re: General Partnership tax question

Post by McDuff10 »

Mule,
This is a simple case of exiting a general partnership due to conflicting ideas of how to run a business. No issues with accuracy of previous returns. Just want to know if there would be any reason to file amended returns or a new return that "payed back" previous year's losses or credits. Thanks and please excuse the delay in response.
Two Headed Mule
Posts: 334
Joined: Sat Mar 28, 2009 8:38 am
Location: Brooklyn, New York

Re: General Partnership tax question

Post by Two Headed Mule »

If prior year returns are correct, then there is nothing to amend. The reference to "paying back" certain losses is a bit cryptic, so it's hard to know what you have in mind. As a general rule, your exit from the partnership will be when things are "trued up" -- that is, when the economics and tax are reconciled. If prior year losses overstated your actual economic losses from the partnership (but in accordance with the Code), then that will be dealt with upon your exit. To take just one example, it is common for a partner to be allocated depreciation from a rental property. If, as is usually the case, that depreciation overstates the actual economic depreciation of the property, then nothing is amended, but there is recapture in the year that either the property is sold or the partner sells/is redeemed.

Mule
Topic Author
McDuff10
Posts: 23
Joined: Mon Aug 03, 2015 12:19 am

Re: General Partnership tax question

Post by McDuff10 »

Thanks Mule, that was helpful. Once I take a closer look at the K-1, I am sure I will have more questions.
billern
Posts: 1079
Joined: Fri Dec 07, 2007 3:08 pm

Re: General Partnership tax question

Post by billern »

I can think of no circumstances where the departure of a partner would impact taxable income or income allocations for prior years partnership tax returns were the returns were correct when originally filed.

Perhaps someone read the partnership agreement and realized the tax returns have not been filed consistently with the agreement, or errors were discovered in the tax returns or accounting records.
Post Reply