Web Assignment

BLAW 320-50

Chapter 17 Web Assignment

1.) Partnerships are considered to be "pass-through" entities for tax purposes. What does this phrase mean? (3 pts.)

It basically means that all expenses go through the partnership to each of the partners, who have to pay taxes on their share of profits, on their respective income tax returns.

2.) A partnership must file two forms with the IRS. What are these forms called, and why are they filed? Do the partners receive any tax documents from the partnership? (3 pts.)

The forms that they have to file are Form 1065 and Schedule K-1. Form 1065 is an informational form that the IRS uses to determine whether each of the partners is properly reporting their income. Each partner must also file a Schedule K-1 that determines each partner’s share of the profits and expenses. They do receive a copy of Schedule K-1 from the partnership.

3.) How do partners pay income taxes on the income they receive from the partnership? What schedule is used to report such income to the IRS? Must partners pay taxes on profits even if those profits are not distributed to the partners? (3 pts.)

Each partner set aside an expected amount of money to pay taxes on their share of the profits. They report each quarter. Profits are taxed whether they are received by the partners or not.

4.) What is a "distributive share"? How are distributive shares established? (3 pts.)

It’s the profits that each partner is entitled to. It is determined by the percentage of the partnership that they own.

5.) What are self-employment taxes? Are partners required to pay self-employment taxes on their shares of partnership profits? Are they taxed the same as employees in this respect? (3 pts.)

The self-employment taxes include Social Security and Medicare. Partners are required to pay, however they can deduct half of the self-employment taxes from their taxed profits. There are differences between the partners and employees. The differences...