General Business Credit

[PAULHA]

I have a client that is a 1/3 partner in an Eligble Small Business partnership. The first year of the partnership was 2009.
The t/p's return for 2010 has been extended due to the fact the K-1 was not ready. The other day I received the final K-1 for the year 2010 and this year the partnership is eligble for the R&D credit and the amount passed through to the t/p is $9,000. This is the only business credit passed through to the t/p for 2010. There were no general business credits passed through for 2009.

I have determined the taxable income that is attributable to the partner's interest in the partnership. Based upon my calculation the partner has an unused general business credit of $6,225 for 2010.

I have read the Form 3800 instructions and applicable code sections regarding the general business credit. Based upon my understanding the t/p can carryback the unused credit to 2009 and apply it to the partners attributable taxable income tax for that year via a Form 1040X.Is my thought process correct here????

I am a small sole practitioner and this is my first experience with the general business credit and the carryback provision-want to get it right.

Thank you in advance


I know that this seems like an inexperienced question. Need you input

[WhiteOleander]

I don't have alot of experience with the R&D credit. But, based on the instrutions I read, you are correct re: the one year carryback. Then it appears that the remaining credit (if there is any) will carryforward for 20 years. I'm not sure if the t/p will ever get to use the 20 year carryorward since the business closed in 2010.

HTH

[PAULHA]

General Business Credit

When I mentioned final K-1 for 2010 I did not mean the partnership was going out of business. I meant that the K-1 was finalized for 2010 and the return could now be prepared.

[WhiteOleander]

Then I believe the t/p may get some use of the credit in future years. I would just make sure your client understands how the credit works. Many think they get the credit regardless of the tax attributed to that source and blame the tax preparer in future years if they are unable to utilize them.

[PAULHA]

General Business Credit

White,

Thanks for your input.