Question

I appreciate your explanation. I found different answers on this questions and it can be confusing.

1. A taxpayer is required by law to provide the payer's name, address, and tax identification number when reporting which type of interest on their return?
A. Installment sales.
B. Nominee interest.

2. Permanent adjustments on Schedule M-1 (Form 1065) include:
A. Depreciation, amortization, and depletion.
B. Government penalties paid, political expenses, and 50% of deductible meals
C. Political expenses, depreciation, and 50% of deductible meals.
D. 50% of meals and 100% of entertainment, depletion, and government penalties paid.

Answer 1

Answer 1

Nominee interest is interest that a person collects on behalf of someone else. When a person receives nominee interest, they are responsible for either paying tax on that interest or passing the interest on to its rightful owner. If the person who receives the nominee interest opts to pass the money on to the other person, they must fill out and file the tax form 1099-INT wherein Payers name, Address and TIN have to be mentioned. In this way, the IRS will know that the person receiving the nominee interest is not responsible for paying taxes on that money, but that the other person is.

Answer 2

Government penalties paid, political expenses, and 50% of deductible meals (Option B).