Lesson 1.1.2 Legal Framework

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來自 University of Illinois at Urbana-Champaign 的課程

Taxation of Business Entities II: Pass-Through Entities

9 個評分

University of Illinois at Urbana-Champaign

Taxation of Business Entities II: Pass-Through Entities

9 個評分

課程 4（共 5 門，Specialization U.S. Federal Taxation）

This course provides an introduction to the U.S. federal income taxation of pass-through business entities, including Subchapter S corporations, partnerships, and limited liability companies. The course focuses on the relevant provisions of Subchapters S and K of the Internal Revenue Code, as well as related Treasury Regulations and judicial opinions, governing the formation, operation, and termination of pass-through entities. Practical in-class study problems facilitate self-discovery of technical tax knowledge along with the development of a variety of professional skills and attitudes.

從本節課中

Module 1 Partnership Formation

In this module, you will be introduced to partnerships. We will delve into the formation of partnerships along with the characteristics that differentiate this form of business from other U.S. entities. This module focuses on the eligibility of legal ‘persons’ to form a partnership and the nonrecognition provisions and holding periods that apply to the contribution of such capital. Exceptions to the nonrecognition rules will be highlighted along with additional elections and treatments available to partnership formation.

Lesson 1.1.1 Partnerships4:21

Lesson 1.1.2 Legal Framework2:19

Lesson 1.1.3 Special Basis Concepts2:06

Lesson 1.1.4 Other Issues4:05

與講師見面

Michael P Donohoe, PhD, CPA
Associate Professor of Accountancy and PwC Faculty Fellow
Department of Accountancy, Gies College of Business

Subchapter K is unique in that it does not view partnerships as

taxable entities specifically Section 701 states that,

"A partnership as such shall not be subject to the income tax imposed by this chapter.

Persons carrying on business as partners shall be liable for

income tax only in their separate or individual capacities".

In other words, the income or loss of a partnership

instead flows through to the partners at the end of the tax year,

who report their proportionate share on their tax returns.

As a result, the partnership itself pays no entity level federal income tax.

This tax treatment occurs whether or not the partnership

distributed any profits to the partners during the year.

The past of tax treatment of partnerships and partners stems from

two legal concepts that shape virtually every partnership tax rule.

First the aggregate concept views a partnership as a conduit through which income,

credits, deductions and other items flow through to the partners.

With this concept, the partnership is viewed as a collection

of taxpayers joined in an agency relationship.

An example of this concept in practice is the fact

that the partnership incurs no entity level income tax.

Second, the end of the concept treats partners and partnerships as

separate elements and gives the partnership its own tax identity.

Under this concept, the partnership is an entity with a legal identity.

As an example of this concept,

partnerships file an information return form and 65 with

the IRS that summarizes its business activities for the tax year. More on this later.

As mentioned, these concepts shape most partnership tax rules.

In particular, the aggregate concept tends to guide many of

the general rules while the entity concept

guides many of the exceptions to the general rules.

However, as you have come to expect from tax law,

some rules are shaped by both of these concepts.

Nevertheless, keeping these concepts in mind as the course progresses will help you

conceptualize the overarching objectives of many key partnership tax rules.

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