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Running a partnership: flow-through and partner basis

SEE 2 Chapter 4 · IRS outline 1B1, 1B3, 1B5

Pine Street Bakery's first year is over, and it made money. Jon wants to know why he owes tax on $60,000 when he only took out $36,000. Mira wonders why their dividends are on a separate line. Rosa, who gets paid a fixed amount, is puzzled by her self-employment tax. Theo pulls out a blank Schedule K-1 and, with Nadia looking over his shoulder, works through every line.

In this chapter

1. Flow-through: the partnership reports, the partners pay
2. Self-employment income of partners
3. Guaranteed payments
4. Partner's dealings with the partnership
5. Outside basis: the running total
6. Three gates for a partner's loss

This chapter has 6 lessons and 50 practice MCQs with explanations, plus flashcards and a recall sheet.

What this chapter covers

• Separately stated items and the K-1
• self-employment income
• guaranteed payments
• partner dealings
• outside basis
• loss limits in order

Chapter 3: Forming a partnership · Chapter 5: Partnership distributions, exits, filing and audits