If the partner acquired the interest in exchange for a contribution to the partnership, his basis generally equals the amount of money and the partner’s adjusted basis in any property contributed to the partnership. Since the partners have already paid tax on the income when it is earned, a complex system of rules applies to prevent double taxation when the income is later distributed to the partners. [35] Because partnership assets may have appreciated or depreciated in value, this usually results in a disparity between the buyer-partner’s basis in his partnership interest (outside basis) and his allocation of the partnership’s basis in each of the assets owned by the partnership (inside basis). The geographical focus is on developed countries. Higher income tax can enable a redistribution of income within society, but may have an impact on… [30] Assuming the S corporation has no accumulated earnings and profits, the shareholder will have no gain on the later distribution except to the extent that the amount of the distribution exceeds his adjusted basis in the stock. J Popul Econ. The seller-partner will recognize ordinary income to the extent that the gain from the sale of his partnership interest is attributable to unrealized receivables and inventory. The partner’s basis in his partnership interest in increased by: The partner’s initial basis in the partnership interest is decreased (but not below zero) by: These basis adjustments depend in large part on the allocation of partnership income, gains, losses, deductions, and credit among the partners.
This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship. All Rights Reserved. As with S corporations, the tax consequences of a distribution to a partner are heavily dependent on the partner’s basis in his partnership interest.
It is widely believed that the individual income tax, with progressive tax rates, can reduce the inequality of income distribution or at least slowdown its growth. [8] I.R.C. These adjustments to basis work with the rules governing distributions to ensure that partnership income is taxed and deductions are taken only once. Taxation reduces the purchasing power of the people and it reduces their consumption.
NIH If you think you should have access to this title, please contact your librarian. Schwodiauer G, Wenig A. Effects of Taxation on Consumption and Employment.
[27] The one exception is for disproportionate distributions, which are treated as a sale or exchange by the partnership. Reg. Unlike the rules that apply to C corporations, which tax income both at the entity and at the owner level, the partnership rules are designed to only tax income once, at the owner level. This discussion of the tax consequences of contributions to partnerships will also apply to limited liability companies unless the limited liability company has elected to be taxed as a corporation.
Oxford Scholarship Online requires a subscription or purchase to access the full text of books within the service. J Popul Econ. 2. Part III Corporate Taxation and Taxes on Capital, 1 General Characteristics of the Tax System, 8 The Taxation of Investment Income and Savings, 9 Effects of Taxation on the Distribution of Income, 11 Corporate Tax Levels and Tax Incentives, 14 The Traditional Framework of Indirect Taxes, 18 Local Taxation and Intergovernmental Fiscal Relations, 1 General Characteristics of the Tax System, 8 The Taxation of Investment Income and Savings, 9 Effects of Taxation on the Distribution of Income, 11 Corporate Tax Levels and Tax Incentives, 14 The Traditional Framework of Indirect Taxes, 18 Local Taxation and Intergovernmental Fiscal Relations. Download : Download full-size image; Fig. [29] The distribution then reduces the shareholder’s basis.
A partner’s initial basis in his partnership interest depends on how the partner acquired the interest. For example, higher taxes on carbon emissions will increase cost for producers, reduce demand and shift demand towards alternatives. J Dev Econ.
| William and Mary Tax Institute December 2, 2000 Page 1 UistributiLsTaxatim n Distributions from Partnerships and Limited Liability boll W. 11%. A partner’s initial basis in his partnership interest depends on how the partner acquired the interest.
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