Question

How does a partnership report its income for tax purposes? Who makes most elections related to partnership income and deductions?

In keeping with the (aggregate/ entity/ consolidated) concept, a partnership must file (a tax reporting/ an informational) return, Form (1120/ 1041/ 1040/ 1065) . On this return, (each partner/ the partnership) makes most elections regarding the treatment of partnership items and no tax is calculated.

Compare the treatment of the business interest expense limitation versus the qualified business income deduction. What theories underly this treatment?

For business interest expense, the (partner/ partnership) determines whether the 30% deduction limitation under § 163(j) applies. Treatment of the carryover at the partner level is consistent with the (aggregate/ entity/ consolidated) theory.

The (partner/ partnership) calculates the § 199A qualified business income deduction. The (partner/ partnership) calculates and reports the information the (partners/ partnerships) need to calculate any limitation on the deduction. This treatment is consistent with the (aggregate/ entity/ consolidated) theory.

Answer 1

In keeping with the aggregate concept, a partnership must file an informational return, Form 1065 . On this return, the partnership makes most elections regarding the treatment of partnership items and no tax is calculated.

For business interest expense, the partnership determines whether the 30% deduction limitation under § 163(j) applies. Treatment of the carryover at the partner level is consistent with the entity theory.

The (partner calculates the § 199A qualified business income deduction. The partnership) calculates and reports the information the partners need to calculate any limitation on the deduction. This treatment is consistent with the consolidated theory.