Final Year 1065

[JG EA]

It is the final year. Partners have always received guaranteed payments. What do you think of taking all the profit in guaranteed payments to equal zero?

The reason is then there would be no taxable liquidating distributions. (No basis left.)

Thanks,
JG

[OldJack]

What is the point, it amounts to the same thing tax wise. Guaranteed payments is just another way of distributing profit. You still have to liquidate or distribute any assets on the final tax return that are still in the partnership even though there probably would not be a taxable transaction. However there could be taxable income if distributions are not equal to ownership and deemed to be a sale of partnership assets. Final 1065 should account for zero assets on page 4 balance sheet. However, you must consider the partners "outside basis" for the 1040 if different than the book basis.

[Unregistered]

And why pay SE on the dissolution?

[OldJack]

And why pay SE on the dissolution?

Distribution of current year profit (original post) as guarantee payments or as taxable current year profit on the 1065-k1 is both subject to SE tax and income tax. Guarantee payments are only a method of unequal distribution of profit usually due to labor by the partner.

If the profits are from prior years than simply cash distribute them as tax-free distributions on line 19 of page 3, form 1065.

[JG EA]

My blunted point

My point was put very badly. Guaranteed payments are not basis for partners of a partnership. So, I was thinking if I brought the profit down to zero it would be OK.

But I didn't remember that they still have money in the bank that was distributed and with no basis there would be taxable income on the distribution also.

So, unless my thinking is really out the window, it would be better to cut down the guaranteed payments and have the rest of the profits be bottom line. (They'll have to pay SE tax on all the profit, I know).

Then they will have some basis to cover the distribution and no CG on the this liquidating distribution.