Month: September 2021

Tax Basis Method for Partnerships: The Transactional Approach

At the end of 2020, the IRS announced important changes to their compliance rules for partnerships. Starting with tax year 2020, partnerships must report their capital accounts using the tax basis method. Capital accounts show the equity in a partnership owned by each partner, including items like initial contributions made by each partner, business profits …

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Understanding Partnership Capital Accounts

Beginning in tax year 2020, the IRS has updated its compliance rules for partnerships. Most partnerships will now be required to report their capital accounts. These accounts show the equity owned by each partner and typically include information like the initial contributions made by each partner, business profits and losses assigned to each partner, and …

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Calculating Adjusted Tax Basis in a Partnership or LLC: Understanding Inside vs. Outside Basis

Calculating adjusted tax basis in a partnership or LLC takes us into a complex area of tax law. Remember that the tax basis is equal to the purchase price of an asset minus any accumulated depreciation. This formula sounds simple enough, but a business’s entity type can introduce unique complications in determining the initial value …

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