Sch A - Job expenses

[Rae]

Band member has K-1 income. Purchases equipment personally for use in band. Can this go directly on Sch A - Job expenses? New client - last year's preparer filled out a 4562 to Section 179 it and enter on line 21 of Sch A. I don't understand why this extra step would be necessary.
To me it is the same as 'tools' for a job.
Extra form fee?
Thanks my new-found friends!
Rae

[S T]

Or would it

Presuming he materially participated in trade or business activity and has enough basis-

He has a K-1 from the partnership which transfers to Sched E page 2

If t/p has unreimbursed expenses relating to the partnership income, wouldn't it go as well on Sched E - part 2

Sandy

[Jesse]

I agree with Sandy, UPE Schedule E.

But I do believe they need to have this in the Partnership agreement, if they don't have it in writing I would suggest to get it in writing - like yesterday.

[Kram BergGold]

verbal ok

It i smy understanding that if the written partnership agreement is silent on the issue that a verbal agreement is sufficient. Written is better, no doubt.

[Gene V]

Band member has K-1 income. Purchases equipment personally for use in band. Can this go directly on Sch A - Job expenses? New client - last year's preparer filled out a 4562 to Section 179 it and enter on line 21 of Sch A. I don't understand why this extra step would be necessary.
To me it is the same as 'tools' for a job.
Extra form fee?
Thanks my new-found friends!
Rae

I agree with the other members answer, however to answer your question, if it was to go
on schedule A, I wouldn't show it as "tools for a job" unless it was to last less than a year.
Probably the reason the other accountant put it on 4562 was because it probably had a 5 year or longer life.

[Black Bart]

Agree with

I agree with the other members answer, however to answer your question, if it was to go
on schedule A, I wouldn't show it as "tools for a job" unless it was to last less than a year.
Probably the reason the other accountant put it on 4562 was because it probably had a 5 year or longer life.

the others, I'd go to E to avoid A's 2% haircut (Kram's "verbal agreement" sounds good to me -- who can prove otherwise?).

About that A, though -- I'm in Gene's camp about the "tools" life and the amount plays a part (for me). At one time, I'd 4562 anything over a hundred bucks, but inflation's diluted that figure and nowadays I use $300-$500 (and up/your choice) for a ceiling before going to S179.

Here's a link for more specific "where to put it" (on E) info. See page E-7 "Unreimbursed Partnership Expenses" (UPE).

http://www.irs.gov/pub/irs-pdf/i1040se.pdf

[Rae]

This is great!

Entering on Sch E reduces the SE tax which makes a difference on total return, of course. So, if I understand correctly, we're looking for the Partnership to state that each members 'personal' equipment will be purchased and paid for by themselves?
I would assume this is the way most bands would do it. Your musical instrument is yours, stage equipment, etc is owned by partnership. But in writing? that should be interesting, I will check.
Does H&R Block do amended returns for free? I'd have client go back to them and ask!

[Gretel]

Yes, it's definitely needs to be part of the partnership agreement. Besides just stating that partner has to pay personally it also needs to state that no reimbursement is available as well as three other requirements are met. They are stated in TTB somewhere.

It's about economic effect, restoration of negative equity account and something else.

And, yes, needs to go on Sch. E, page 2.

[Jesse]

Another PLR on this topic

Posted by another knowledgeable contributor:

The effect is not the same. treated as a capital contribution the partner incurring the expense only receives his pro rata share of them. The remainder benefits the other partners.

"It is well settled that a partner may not directly deduct
partnership expenses on his individual tax return. Cropland
Chem. Corp. v. Commissioner, 75 T.C. 288, 295 (1980), affd.
without published opinion 665 F.2d 1050 (7th Cir. 1981);
Wallendal v. Commissioner, 31 T.C. 1249, 1252 (1959). An
exception applies when there is an agreement among the partners
in a partnership agreement, or in a routine partnership practice
tantamount to an agreement, which calls for a partner to pay
partnership expenses from his own funds. Cropland Chem. Corp. v.
Commissioner, supra at 295; Wallendal v. Commissioner, supra at
1252; Klein v. Commissioner, 25 T.C. 1045, 1051-1052 (1956)."

See http://www.ustaxcourt.gov/InOpHistor...es.sum.WPD.pdf