Which of the following is an element of the requirement that partnership allocations must have substantial economic effect? If an allocation of income, loss, or deduction is made for tax purposes, a similar allocation must be made for partnership book purposes so the partner's capital account (and rights to partnership capital) reflect a corresponding increase or decrease. Liquidations must be made in accordance with partner's capital accounts and a partner with a negative capital account must have the obligation to restore the capital account deficit in case of liquidation. Even if corresponding allocations are made for tax purposes and book purposes, those allocations must be made for economic reasons independent of minimizing taxes based on the partners' individual tax situations.
Which of the following is an element of the requirement that partnership allocations must have substantial economic effect? If an allocation of income, loss, or deduction is made for tax purposes, a similar allocation must be made for partnership book purposes so the partner's capital account (and rights to partnership capital) reflect a corresponding increase or decrease. Liquidations must be made in accordance with partner's capital accounts and a partner with a negative capital account must have the obligation to restore the capital account deficit in case of liquidation. Even if corresponding allocations are made for tax purposes and book purposes, those allocations must be made for economic reasons independent of minimizing taxes based on the partners' individual tax situations.
Chapter21: Partnerships
Section: Chapter Questions
Problem 6BCRQ
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Transcribed Image Text:Which of the following is an element of the requirement that partnership allocations must have substantial
economic effect?
If an allocation of income, loss, or deduction is made for tax purposes, a similar allocation must be made for
partnership book purposes so the partner's capital account (and rights to partnership capital) reflect a
corresponding increase or decrease.
Liquidations must be made in accordance with partner's capital accounts and a partner with a negative capital
account must have the obligation to restore the capital account deficit in case of liquidation.
Even if corresponding allocations are made for tax purposes and book purposes, those allocations must be
made for economic reasons independent of minimizing taxes based on the partners' individual tax situations.
All of these are elements of substantial economic effect
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ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT