Partnership Income Research Articles

Business Valuation Cases in Brief

Business Valuation Cases in Brief

Guaranteed Payments Made In Kind By A Partnership

If a partnership makes a payment to a partner for services rendered in the latter's capacity as a partner or for the use of capital, to the extent that the payment is determined without regard to partnership income, it is characterized by the Internal Revenue Code as a "guaranteed payment" and is treated differently from other partnership distributions. In addition, if a partnership makes a payment in liquidation of a retiring or deceased partner's interest in the partnership, part of that payment may be characterized as a guaranteed payment by section 736(a)(2). We will discuss in Part VI of this article the circumstances when a liquidating payment is treated as a "guaranteed payment." While section 707(c) and 736(a) refer to a "payment," there is no reason that it must be made in cash, and the leading treatises on partnership taxation agree that guaranteed payments can be made in kind.As used in this article, a "liquidating" distribution or payment refers to a partnership distribution or payment made pursuant to the liquidation of a partner's interest in the partnership. All other partnership distributions or payments are sometimes referred to as "operating" distributions or payments.

Partnership Special Allocations Revisited

Special allocations of items of partnership income, gain, loss, and deduction have long created difficulties for the tax law. The paper argues that most such allocations should not be respected for tax purposes because they inappropriately separate the character of partnership items from the partners that are economically entitled to them. The paper suggests that special allocations instead ought to be viewed as transactions in partnership interests between or among the partners themselves. A number of consequences follow. The paper also argues that Treasury‘s rules for establishing the partners‘ interests in the partnership when an allocation fails the test for substantiality likely are inconsistent with section 704(b) of the Internal Revenue Code.

Where in the World Does Partnership Income Go? Evidence of a Growing Use of Tax Havens

Where in the World Does Partnership Income Go? Evidence of a Growing Use of Tax Havens

Tangent Host: An Uneasy Partnership

Tangent Host, a Canadian-based website services provider, was established in 2014 as a general partnership by two personal and professional friends. Each had a 50% ownership stake in profits and workload. In 2016, it had total revenue of US$121,440, divided evenly between web design (100 clients) and web hosting (375 clients). As a start-up, Tangent had taken advantage of growth opportunities and had overcome a number of operational challenges. By 2017, there were mounting unresolved issues: tension between partners, concerns with uncollected receivables, technical performance, and future direction. One of the partners seemed to be less committed to the partnership, shifting interest and time to other activities that generated personal not partnership income. The case provides thought-provoking issues confronted by a new venture and partnership: friction between partners, customer relations, service performance, increasing revenue, scaling a business, making strategic choices, and conflict resolution.

Partnership Income Tax on Social and Economic Development in Nigeria

This research work examines the partnership income tax on social and economic development in Nigeria. The objective of the study was to examine how partnership income tax revenue contributes to social and economic development in Nigeria. Secondary data are obtained from relevant literatures such as Central Bank of Nigeria Statistical Bulletin and National Bureau of Statistics publications. Data were tested using the Ordinary Least Square Linear Regression model. Findings show that, partnership Income Tax Revenue is making a unique significant contribution to the social and economic development in Nigeria and composition of the GDP. It is concluded that the results affirmed a rise in the income tax from partnership firms leads to an increase in social and economic development in Nigeria. It is recommended that government should ensure effective utilization of the income accrued taxation to encourage continuity in tax payment by the tax payers. Keywords: Economic Development, Gross Domestic Products, Partnership, Partnership Income Tax, Personal Income Tax, Social Development DOI : 10.7176/RJFA/10-6-03 Publication date :March 31 st 2019

Research on Risk Effect of Scientific and Technological Achievements Transformation and Interests Mechanism

Risk characteristics of scientific and technological achievements transformation is analyzed in this paper. Objective existence of the effect of risk mechanisms is also studied. The balance model of risk effect and binding effect is temptation to build. It establishes the mathematical model of the partnership income allocation mechanism effectively based on “investment, risk sharing, revenue sharing” principle and multi-function differential principles. It also gives the scientific calculation method of “β” which can make the ratio of profits allocation considering the investment and of partners.

Partnership models and income of micro-small enterprises as Gerbang Emas funds beneficiaries in East Flores Regency

This study aims to describe the business partnership model in the development of Micro, Small Enterprises (MSE) of the creative economy and to prove and explain if there is or there is not the increase in MSEs income after obtaining Community Block Grant or Bantuan Langsung Masyarakat (BLM) from Gerakan Membangun Ekonomi Masyarakat (Gerbang Emas) (Community Economic Development Movement). The study used cluster sampling method on 16 types of business. From sampling, we got 105 out of 502 MSEs that are BLM from Gerbang Emas program beneficiaries. The data used in this study are primary data obtained by interviews and questionnaires with both open and closed sentences and questions. Descriptive statistical, correlation, and paired sample t-test methods were used for data processing. The results show that 85.85% of the MSEs partner with government agencies, NGOs, and Church, 11.32% of them work in partnership with other MSEs and other institutions, 49% of them partner with distributor, 75% of them partner with raw material supplier, and 8% of them don’t partner with any party. The revenue of MSEs in creative economy sector experienced an average increase of 12.76% from Rp. 4,248,007 in the previous year and there is statistically a strong correlation (0.999) between income before getting BLM and after getting BLM. There is a significant difference between income before and after getting BLM from Gerbang Emas. Gerbang Emas program only focuses on funding or providing capital to MSEs, doesn’t try to give training on financial management in business so that only 48.5% of respondents differentiate or separate the funds for business purposes and for household use. Keywords: Community, Creative Economy, Partnership

Taxation of Partners and Partnerships in Nigeria

Partners, not partnerships, are taxed in Nigeria. But partnership arrangements affect the computation of the tax liability of partners. Taxation of partners is governed by the Personal Income Tax Act (PITA). Under PITA, partners are taxed as individuals with chargeable incomes derived from the partnership business and other sources. They are taxed according to their profit shares from partnership income. To determine partners’ tax liabilities, the partners first compute the partnership income and then distribute it to the partners according to the articles of partnership. The partners deduct allowances and reliefs. Afterward, the balance is taxed under PITA. Understanding how partners are taxed in Nigeria requires first understanding the meaning and nature of partnerships as well as the financial relationship that exists between partners.

ANALISIS USAHATANI TEMBAKAU POLA KEMITRAAN DAN MANDIRI DI DESA LAMUK KECAMATAN TLOGOMULYO KABUPATEN TEMANGGUNG

One of the plantation sub-sector is now growing quite significantly is tobacco, where most farmers grow tobacco because this plant is considered to provide more added value when compared to other subsectors. Temanggung is known for quality tobacco than the tobacco of any area. To overcome the problem of capital and other issues, the majority of tobacco farmers in Temanggung working with the company’s domestic tobacco industry. Through this business partnership is expected to be fast so that the mutualistic symbiosis flaws and limitatation faced by tobacco farmers can be resolved. This study aims to : (1) knowing the production and the factors that influence the producton of tobacco and independent partnership (2) tp find out the income and factors that affect farm income on tobacco and independent partnership (3) to find out the allocative efficiency of input use on tobacco farming and independent partnership (4) knowing the risks of production and the risk of tobacco farm income.This study uses secondary data and primary by taking 60 farmers sample of 30 farmers and 30 farmers partnership patterns independently. To determine tha factors affecting farm production and income patterns of tobacco use and independent partnership Ordinary Least Square regression (OLS), to know the iffernce between the tobacco farm income and independent partnership used different test, to determine the allocative efficiency an production risk and income risk using coeffisien variation.Based on the result of the analysis indicate that the factors that influence the production is labor, the amount of organic fertilizer, the amount of inorganic fertilizrr, pesticides and dummy partnership, while the factors that affect revenue is the price of pesticide, land area, and dummy partnership. From the test resultas show the efficiency, not allocative efficient. Production risk and the risk of partnership income of farmers is higher than the patterm of independent farmers.

How the Rich Respond to Anticipated Tax Increases: Evidence from the 1993 Tax Act

We examine the responses of high-income taxpayers to the increases in the top income tax rates under the Omnibus Budget Reconciliation Act of 1993. We use a large panel of tax returns spanning 1987 to 1996 to estimate the elasticity of taxable income using a difference-in-differences approach. We estimate that the ETI is roughly 0.3 for high-income taxpayers, but that there was significant intertemporal income-shifting ahead of tax rate increases that were easily anticipated. Failing to account for this shifting response produces a much higher ETI estimate of 0.7. We find changes in the types of income reported by high-income households: decreases in wage income, coupled with increases in capital gains and S corporation income which both received preferential tax treatment. While all high-income households re-timed their taxable income ahead of the tax increases, this effect is even stronger for executives. There is also suggestive evidence that executives of S corporations responded, reducing their wage and partnership income and increasing S corporation income, to avoid the uncapping of the employment tax base.

Too Big to Cheat: Efficiency and Investment in Partnerships

Private information may limit insurance possibilities when a few agents form a partnership to pool idiosyncratic risk. We show that these insurance possibilities can improve if the partnership's income depends on capital accumulation and production, because cheating distorts investment. As agents' weights in the partnership increase, they are more affected by the investment distortion, and their incentives to misreport under the full information allocation are reduced. In the long run, either one of the partners is driven to immiseration, or both partners' lifetime utilities are approximately equal. The second case is only possible with capital accumulation. The theory's testable implications are in line with empirical evidence on the organization of small-business partnerships.

Partnership Special Allocations Revisited

Special allocations of items of partnership income, gain, loss, and deduction have long created difficulties for the tax law. The paper argues that most such allocations should not be respected for tax purposes because they inappropriately separate the character of partnership items from the partners that are economically entitled to them. The paper suggests that special allocations instead ought to be viewed as transactions in partnership interests between or among the partners themselves. A number of consequences follow. The paper also argues that Treasury's rules for establishing the partners' interests in the partnership when an allocation fails the test for substantiality likely are inconsistent with section 704(b) of the Internal Revenue Code.

Hybrid Entities Why Not Tax Pass-throughs as Corporations?

It doesn't make sense to allow certain taxpayers to choose whether they are a corporation or not. The US check-the-box rules, since 1997, have produced a boost to international tax arbitrage. The hybrid entities are the result of the discordances between different jurisdictions, qualifying them at the same time as corporation or pass-through. The misuse of hybrid entities offered a powerful tool for tax minimization on local and foreign earnings. It is not by chance that the financial sector took clear advantages through the special purpose vehicles, structured arrangements, loan and credit transactions and parking of assets for tax purposes. The hybrid entities or reversal hybrid entities meant an incentive for aggressive tax planning. The right solution should be the taxation of pass-through entities as corporations: the partnership income and the attribution income to the partners.

Income Tax Compliance and the Black-White Disposable Income Gap

The U.S. Government has detailed historical knowledge of income tax compliance differences by categories of income taxpayers. Wage and salary earners know that information returns precede their tax filing with the Internal Revenue Service (IRS), and they respond with high-level compliance. Because shareholders are the residual claimants for corporate income, and because corporations have access to legal means to avoid tax liabilities, corporate employees have little incentive to misreport corporate income. The IRS also receives information returns for partnership distributions; therefore, noncompliance on partnership income tax is constrained. However, the IRS receives no information returns for income earned by operators of proprietorships, and this class of income taxpayers is the least compliant. This paper explores how variation in tax compliance and Black Americans’ disproportionately low representation in a high tax noncompliance income category disadvantages Blacks and contributes significantly to the Black-White disposable income gap.

Financial Sustainability Within UK Charities: Community Sport Trusts and Corporate Social Responsibility Partnerships

The change in political leadership in the UK in 2010 has created financial uncertainty and instability for many third sector organisations. In a shifting funding landscape, it is clear that an over-reliance on Government funding is a risky strategy and that there is a need to diversify and seek out alternative sources of revenue. This article considers the impact of political change on the financial sustainability of community sports trusts associated with Premier League and Football League clubs in England. It explores sources of revenue through the analysis of financial statements, revealing that on average community sports trusts receive a significant proportion of income from grant funding whilst sponsorship income is relatively small. The article goes on to discuss the potential for community sports trusts to diversify revenue streams by developing social partnerships that address the corporate social responsibility (CSR) agendas of commercial organisations. It illustrates that although commercial sponsorship can provide benefits including the provision of additional funding that can enable financial stability, key issues include the balance of power, the impact on organisational flexibility, whether there is a need to restructure, and the development of long-term partnerships. Although the findings from this article are focused on a particular type of charity, given the importance of CSR partnership income for the charities sector they may also have broader implications for other charitable organisations.

Fixing the Double Deduction from Carried Interest

Commonly and appropriately, a service partner is taxed on the value of a partnership interest transferred as compensation. When the value of the interest exceeds its tax book value (capital account), the partnership seems to be allowed a double deduction, akin to deduction of both the accrual and the payment of the expense. The partnership gets a deduction for the fair market value of the partnership interest that the service partner includes in income and the other non-service partners later allocate partnership income over to the service partner, which is functionally equivalent to a second deduction for the same item. The Shelf Project proposal would limit the partnership’s deduction to the basis or capital account transferred to the service partner. The proposal also would tax sale of an income interest in the partnership as immediate ordinary income. The proposal would also apply to S corporation stock, where the problem is the same. The proposal is equivalent to treating the partnership as if it had sold ordinary assets to pay the partnership interest. The discussion rejects the argument that the transfer of the partnership interest fits under section 721 for nonrecognition, and rejects an analogy between section 1032 (nonrecognition by a corporation in issuing stock) and section 721. It rejects the argument that the partnership should be treated as selling a fractional share of all its assets. A partnership can sometimes achieve a result better than the proposal by a real sale of assets, but the real sale would solve valuation difficulties and sometimes prevent the inappropriate accounting. The proposal is made as a part of the Shelf Project, which is a collaboration among tax professionals to develop proposals to raise revenue in the ongoing revenue crisis by defending the tax base. It is intended to raise revenue without a VAT or a rate increase in ways that will improve the fairness, efficiency, and rationality of the tax system. The hard work needs to be done now to develop viable proposals. Shelf projects are intended to foreclose both 85 percent income tax rates and 60 percent federal sales taxes. Shelf Project proposals follow the format of a congressional tax committee report in explaining current law, what is wrong with it, and how to fix it.

Revealing an Equitable Income Allocation among Dairy Farm Partnerships

We formulate a method to determine an equitable division of dairy farm partnership income when partners provide unequal amounts of capital, labor, and management and empirically estimate this relationship. New York dairy farm financial data are used within fixed effects and random coefficient panel regression models to reveal a systematic division of dairy farm partnership income among operators’ labor, capital, and management while controlling for heterogeneity arising from differing herd size. Results indicate that controlling for time and heterogeneity across farms due to herd size are important factors when dividing net farm income among unpaid factors of production. Empirical estimates of allocating dairy farm partnership income to equity, operators’ labor, and management are presented.

Integrative Case in Advanced Accounting

ABSTRACT: This instructional resource case presents an integrative approach to developing critical thinking and problem solving skills in the areas of partnership accounting and consolidated financial statements, including financial reporting for companies under common control—two subjects typically studied independently. The case shows that, in the presence of related-party transactions, a conventional partnership income statement may not be useful for assessing either the reasonableness of partnership income distributions or partnership profitability. The case enhances critical thinking by requiring the student to seek an alternative financial reporting solution to a related-party transaction of entities under common control typically not addressed in textbooks and college courses on advanced financial accounting. It can also be expanded to show how accounting may play a role in confronting ethical issues among partners.

Retirement Arrangements of the Self-Employed

When compared to wage earners, the take up rate of qualified retirement plans by the self-employed seems to be much lower. This paper explores the various factors that influence the observed participation and contributions to such plans. The findings show that participation declines with business interest expenses suggesting liquidity constraints. In contrast, both participation and contributions rise with mortgage interest expenses. They also rise with interest and dividend income, self-employment income, as well as tax rates. On the other hand, they decline with the size of partnership income. The latter is perhaps a reflection of reporting conventions employed by high income partners which may mask the true participation rate.