Partnership elections grid.BY THE AICPA AICPA See American Institute of Certified Public Accountants (AICPA). TAX DIVISION'S PARTNERSHIP TAXATION TECHNICAL RESOURCE PANEL (TRP Trp tryptophan. TRP traumatic reticuloperitonitis. Trp tryptophan. ) The AICPA Tax Division's Partnership Taxation TRP developed a Partnership Elections Grid to benefit AICPA Tax Section members; a portion of the Grid is reproduced below. It is a quick reference tool for many of the elections and choices that tax advisers make for clients that operate as a partnership for Federal tax purposes, but does not purport To convey, imply, or profess; to have an appearance or effect. The purport of an instrument generally refers to its facial appearance or import, as distinguished from the tenor of an instrument, which means an exact copy or duplicate. PURPORT, pleading. to be all-inclusive. Before filing returns, tax advisers should refer to the complete Grid (1) for additional elections and related items. Use of the Grid does not replace the need to review the authorities governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. each item. For comments or more information, email mhyman@aicpa.org See .org. (networking) org - The top-level domain for organisations or individuals that don't fit any other top-level domain (national, com, edu, or gov). Though many have .org domains, it was never intended to be limited to non-profit organisations. RFC 1591. .
Manner of making
Election election
First-year elections
1. Election to Attach a statement to the
deduct and partnership return.
amortize
partnership
organizational
expenses.
2. Election Attach a statement to a blank
to be excluded Form 1065, U.S. Return of
from the partnership Partnership Income. In certain
rules. circumstances, if no election
is filed, the partnership
may he deemed to have
made the election.
3. Election Attach a statement to the
to apply the first partnership return filed
proposed contingent after Sept. 22, 2003 and
liability amend any open tax years to
regulations. reflect the proposed
regulations.
4. Election Attach a statement to the
to deduct and partnership return.
amortize
start-up costs.
5. Election File Form 8716, Election To
under Sec. Have a Tax Year Other Than
444 to use a Required Tax Year.
other than a
required tax year.
6. Ratable Attach a statement to the
accrual of return.
real property
taxes.
7. Election By deducting the item on the
to adopt the return in the first tax year
recurring such expense is incurred.
item method
for certain
expenses.
Subchapter K elections
8. Optional Attach a statement signed by
basis an authorized partner to the
adjustment. partnership return.
9. Election Guidance has not yet been
to exclude issued; it may be advisable to
investment attach a statement to the
partnerships partnership return.
from mandatory
basis
adjustments.
10. Inside Attach a statement to the
basis adjustment lower-tier partnership's
to lower-tier return. Both the lower--and
partnership the upper-tier partnerships
assets on the must have a Sec. 754 election
sale of in effect.
an upper-tier
partnership
interest.
11. Inside Attach a statement to the
basis adjustment lower-tier partnership's
to lower-tier return. Both the lower--and
partnership the upper-tier partnerships
assets on must have a Sec. 754 election
a distribution in effect.
from the
upper-tier
partnership.
12. Adjustment Attach a statement to the
to the basis of distribute partner's return.
distributed
property.
13. Basis Attach a statement to the
proration on partner's return.
liquidation of
a partnership
interest.
14. Designation File a statement with the
of tax matters Internal Revenue Service
partner (TMP). Center with which the
partnership return
was filed.
15. Termination Attach a statement to the
of Sec. 444 return for the short period
election to use resulting from the termination
other than of the election.
a required
tax year.
16. Election Attach an election to the
to be treated partnership's return.
as a large
partnership.
Elections
or method
choices made
by applying
a provision
17. Allocation Partnership may allocate the
of single liability among multiple
nonrecourse properties using any reasonable
liability method.
among multiple
properties.
18. Grouping Partners may treat one or
activities. more trade or business or
rental activities as a single
activity.
19. Selection By applying the method or
of Sec. 704(c) including a provision in the
method. partnership agreement.
20. Election No guidance; categorization
to override of the interest on the return
interest- appears sufficient.
tracing rules.
21. Election By reporting the interest
to allocate expense as a deduction on the
interest expense partnership's return, rather
associated than passing it through as a
with distributed separately stated item.
debt proceeds. Limited to lesser of gross
income or expenditures.
Date for making
Election election
First-year elections
1. Election to Due date of the return for
deduct and the tax year in which the
amortize trade or business begins
partnership (including extensions).
organizational
expenses.
2. Election Due date of the first return
to be excluded required to report the
from the partnership partnership's transactions
rules. (including extensions).
3. Election Due date of the return
to apply the (including extensions).
proposed contingent
liability
regulations.
4. Election Due date of the return for
to deduct and the tax year in which the
amortize trade or business begins
start-up costs. (including extensions).
5. Election By the earlier of the 15th
under Sec. day of the fifth month
444 to use following the month that
other than a includes the first day of the
required tax year. tax year the election will
first be effective, or by the
unextended due date of the
return for the tax year
resulting from the election.
6. Ratable Due date of the return for
accrual of the first tax year in which
real property the real property taxes are
taxes. incurred (including extensions).
7. Election Due date of the return for
to adopt the the tax year in which the
recurring expense is incurred (including
item method extensions).
for certain
expenses.
Subchapter K elections
8. Optional Due date of the return for
basis the year of the transfer or
adjustment. distribution (including
extensions).
9. Election Guidance has not yet been
to exclude issued; it may be advisable
investment to make the election by the
partnerships due date of the return
from mandatory (including extensions).
basis
adjustments.
10. Inside Due date of the return for
basis adjustment the year of the sale or
to lower-tier exchange (including
partnership extensions).
assets on the
sale of
an upper-tier
partnership
interest.
11. Inside Due date of the return for
basis adjustment the year of the distribution
to lower-tier (including extensions).
partnership
assets on
a distribution
from the
upper-tier
partnership.
12. Adjustment Due date of the distributee's
to the basis of return for the first tax year
distributed in which the basis of the
property. distributed property is relevant
(including extensions).
13. Basis Due date of the partner's
proration on return for the first year
liquidation of payments are received
a partnership (including extensions).
interest.
14. Designation The partnership may designate
of tax matters a TMP for a partnership
partner (TMP). tax year any time after filing
a partnership return for
that year.
15. Termination Due date of the return for
of Sec. 444 the short period (including
election to use extensions).
other than
a required
tax year.
16. Election Due date of the return for
to be treated the first applicable year
as a large (including extensions).
partnership.
Elections
or method
choices made
by applying
a provision
17. Allocation N/A
of single
nonrecourse
liability
among multiple
properties.
18. Grouping N/A
activities.
19. Selection N/A
of Sec. 704(c)
method.
20. Election No specific guidance; it
to override appears that it should be
interest- made on a timely filed
tracing rules. return for the year in which
debt proceeds are disbursed.
21. Election Due date of the return for
to allocate the tax year in which the
interest expense election is to apply
associated (including extensions).
with distributed
debt proceeds.
Election Authority
First-year elections
1. Election to Sec. 709(b); Regs. Sec.
deduct and 1.709-1(c).
amortize
partnership
organizational
expenses.
2. Election Sec. 761(a); Regs. Sec.
to be excluded 1.761-2(b).
from the partnership
rules.
3. Election Prop. Regs.
to apply the Sec. 1.752-
proposed contingent 7(j)(2).
liability
regulations.
4. Election Sec. 195;
to deduct and Regs. Sec.
amortize 1.195-1.
start-up costs.
5. Election Sec. 444; Temp. Regs.
under Sec. Sec. 1.444-3T(b).
444 to use
other than a
required tax year.
6. Ratable Sec. 461(c); Regs. Sec.
accrual of 1.461-1(c).
real property
taxes.
7. Election Sec. 461(h)(3); Regs.
to adopt the Sec. 1.461-4(g)
recurring (7) and -5.
item method
for certain
expenses.
Subchapter K elections
8. Optional Sec. 754; Regs. Sec.
basis 1.754-1(b).
adjustment.
9. Election Sec. 743.
to exclude
investment
partnerships
from mandatory
basis
adjustments.
10. Inside Sec. 743;
basis adjustment Rev. Rul. 87-115.
to lower-tier
partnership
assets on the
sale of
an upper-tier
partnership
interest.
11. Inside Sec. 743;
basis adjustment Rev. Rul. 92-15.
to lower-tier
partnership
assets on
a distribution
from the
upper-tier
partnership.
12. Adjustment Sec. 732(4); Regs. Sec.
to the basis of 1.732-1(d).
distributed
property.
13. Basis Regs. Sec. 1.736-1(b)(6).
proration on
liquidation of
a partnership
interest.
14. Designation Regs. Sec. 301.6231 (a)
of tax matters (7)-1.
partner (TMP).
15. Termination Temp. Regs. Sec.
of Sec. 444 1.444-1T(a)(5).
election to use
other than
a required
tax year.
16. Election Secs. 771-777.
to be treated
as a large
partnership.
Elections
or method
choices made
by applying
a provision
17. Allocation Regs. Sec. 1.752-3(b).
of single
nonrecourse
liability
among multiple
properties.
18. Grouping Regs. Sec. 1.469-4.
activities.
19. Selection Regs. Sec. 1.704-3.
of Sec. 704(c)
method.
20. Election Sec. 163; Temp. Regs.
to override Sec. 1.163-8T(c)(4)(iii)
interest- (B) and (c)(5)(i);
tracing rules. Notices 88-20 and
89-35.
21. Election Sec. 163; Temp. Regs.
to allocate Sec. 1.163-8T, Notices
interest expense 88-20 and 89-35.
associated
with distributed
debt proceeds.
Reason for making
Election election
First-year elections
1. Election to Permits a partnership to amortize
deduct and organizational expenses over a period
amortize of not less than 60 months. For amounts
partnership paid or incurred after Oct. 22, 2004,
organizational the election permits a partnership to
expenses. deduct organizational expenses equal
to the lesser of such expenses or $5,000
reduced by the organizational expenses
that exceed $50,000, (2) and to
amortize the remainder over 180 months.
2. Election Permits co-owners to treat property
to be excluded as owned directly, rather than
from the partnership as partners, for tax purposes.
rules.
3. Election Permits a basis reduction
to apply the for contingent liabilities
proposed contingent on a separation event (rather
liability than at the time of contribution).
regulations.
4. Election Permits a partnership to amortize
to deduct and start-up costs over a period of not
amortize less than 60 months. For amounts paid
start-up costs. or incurred after Oct. 22, 2004, the
election permits a partnership to
deduct start-up costs equal to the
lesser of such costs or $5,000
reduced by the start-up expenses
that exceed $50,000, (3) and to
amortize the remainder over
180 months.
5. Election Allows a taxpayer to adopt
under Sec. a tax year other than
444 to use the required tax year.
other than a
required tax year.
6. Ratable Allows a partnership to
accrual of ratably accrue real property
real property taxes over the period
taxes. to which they relate.
7. Election Allows a partnership to deduct
to adopt the expenses in the year they become fixed
recurring and determinable if economic performance
item method occurs by the earlier of (1)
for certain 8 1/2 months following the close
expenses. of the tax year or (2) the date the
taxpayer timely files a return.
Subchapter K elections
8. Optional Adjusts the partnership's
basis basis of property under
adjustment. Secs. 743 and 734.
9. Election Permits basis adjustments
to exclude to remain elective for
investment investment partnerships.
partnerships
from mandatory
basis
adjustments.
10. Inside Permits an inside basis
basis adjustment adjustment to a lower-tier
to lower-tier partnership's assets
partnership on a sale or exchange of an
assets on the interest in on upper-tier
sale of partnership.
an upper-tier
partnership
interest.
11. Inside Permits an inside basis
basis adjustment adjustment to a lower-tier
to lower-tier partnership's assets when
partnership there is a distribution from
assets on the upper-tier partnership.
a distribution
from the
upper-tier
partnership.
12. Adjustment Adjusts the partner's basis
to the basis of of distributed property
distributed following a transfer within
property. two years of acquiring
the interest, when no
Sec. 754 election had been
made.
13. Basis Allows a retiring or deceased
proration on distribute partner to
liquidation of report gain evenly throughout
a partnership the liquidation period
interest. (as opposed to recovering basis first).
14. Designation Designates a TMP.
of tax matters
partner (TMP).
15. Termination Allows a taxpayer to adopt
of Sec. 444 another permissible tax
election to use year.
other than
a required
tax year.
16. Election Allows partnerships with
to be treated more than 100 partners to
as a large be treated under the simplified
partnership. flow through electing
large partnership rules.
Elections
or method
choices made
by applying
a provision
17. Allocation Allows a partnership to
of single allocate a single liability
nonrecourse among multiple properties.
liability
among multiple
properties.
18. Grouping Allows one or more trade or
activities. business or rental activities to be
treated as a single activity for
purposes of using passive
losses, if the activities
constitute an appropriate economic unit.
19. Selection Determines the manner
of Sec. 704(c) in which precontribution
method. gains and losses, and
depreciation amortization,
associated with contributed
property are allocated
among the partners.
20. Election Allows a partnership to
to override treat an expenditure from
interest- any account, within
tracing rules. 30 days of depositing debt
proceeds into that account,
as a disbursement of such
proceeds. The character
of the interest expense is
determined by the nature
of the expenditure of
such proceeds. The election
allows the partnership
an alternate method of
determining the use of such
proceeds.
21. Election Allows a passthrough
to allocate entity to characterize interest
interest expense expense as nonpassive or
associated passive (rather than as
with distributed personal interest),
debt proceeds. depending on the activity
conducted.
Authors' note: The authors gratefully
acknowledge the assistance of Gretchen Foley,
PricewaterhouseCoopers LLP, Washington, DC.
(1) Available online at www.cpa2biz biz n. Informal Business. biz Noun Informal business Noun 1. .com/ ResourceCenters/Tax/Partnership/ parmershipElectionsGrid.him. (2) H Conf. Rep't No. 108-755, 108th Cong n. 1. (Med.) An abbreviation of Congius. ., 2d Sess. (2004) (hereinafter here·in·af·ter adv. In a following part of this document, statement, or book. hereinafter Adverb Formal or law from this point on in this document, matter, or case Adv. 1. cited as the "Conference Committee Report") states that all organizational expenses related to a particular trade or business, whether incurred before or after Oct. 22, 2004, are taken into account in determining whether cumulative organizational expenses exceed $50,000. The post-American Jobs Creation Act of 2004 (AJCA AJCA American Jobs Creation Act of 2004 (US) AJCA American Jersey Cattle Association AJCA Association of Juvenile Compact Administrators AJCA All Japan Cooks Association AJCA Alabama Junior Cattlemen’s Association ) Code does not address this issue. (3) The Conference Committee Report, id., states that all start-up Start-up The earliest stage of a new business venture. costs related to a particular trade or business, whether incurred before or after Oct. 22, 2004, are taken into account in determining whether cumulative start-up costs exceed $50,000. The post-AJCA Code does not address this issue. |
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