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Federal Income Tax Rates 2010

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Federal Income Tax Rates 2010

Federal income tax rates 2010 33. Federal income tax rates 2010   Credit for the Elderly or the Disabled Table of Contents Introduction Useful Items - You may want to see: Are You Eligible for the Credit?Qualified Individual Income Limits How to Claim the CreditCredit Figured for You Credit Figured by You Introduction If you qualify, you may be able to reduce the tax you owe by taking the credit for the elderly or the disabled which is figured on Schedule R (Form 1040A or 1040). Federal income tax rates 2010 This chapter explains the following. Federal income tax rates 2010 Who qualifies for the credit for the elderly or the disabled. Federal income tax rates 2010 How to claim the credit. Federal income tax rates 2010 You may be able to take the credit for the elderly or the disabled if: You are age 65 or older at the end of 2013, or You retired on permanent and total disability and have taxable disability income. Federal income tax rates 2010 Useful Items - You may want to see: Publication 524 Credit for the Elderly or the Disabled 554 Tax Guide for Seniors Form (and Instruction) Schedule R (Form 1040A or 1040) Credit for the Elderly or the Disabled Are You Eligible for the Credit? You can take the credit for the elderly or the disabled if you meet both of the following requirements. Federal income tax rates 2010 You are a qualified individual. Federal income tax rates 2010 Your income is not more than certain limits. Federal income tax rates 2010 You can use Figure 33-A and Table 33-1 as guides to see if you are eligible for the credit. Federal income tax rates 2010 Use Figure 33-A first to see if you are a qualified individual. Federal income tax rates 2010 If you are, go to Table 33-1 to make sure your income is not too high to take the credit. Federal income tax rates 2010 You can take the credit only if you file Form 1040 or Form 1040A. Federal income tax rates 2010 You cannot take the credit if you file Form 1040EZ. Federal income tax rates 2010 Qualified Individual You are a qualified individual for this credit if you are a U. Federal income tax rates 2010 S. Federal income tax rates 2010 citizen or resident alien, and either of the following applies. Federal income tax rates 2010 You were age 65 or older at the end of 2013. Federal income tax rates 2010 You were under age 65 at the end of 2013 and all three of the following statements are true. Federal income tax rates 2010 You retired on permanent and total disability (explained later). Federal income tax rates 2010 You received taxable disability income for 2013. Federal income tax rates 2010 On January 1, 2013, you had not reached mandatory retirement age (defined later under Disability income ). Federal income tax rates 2010 Age 65. Federal income tax rates 2010   You are considered to be age 65 on the day before your 65th birthday. Federal income tax rates 2010 Therefore, if you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Federal income tax rates 2010 U. Federal income tax rates 2010 S. Federal income tax rates 2010 Citizen or Resident Alien You must be a U. Federal income tax rates 2010 S. Federal income tax rates 2010 citizen or resident alien (or be treated as a resident alien) to take the credit. Federal income tax rates 2010 Generally, you cannot take the credit if you were a nonresident alien at any time during the tax year. Federal income tax rates 2010 Exceptions. Federal income tax rates 2010   You may be able to take the credit if you are a nonresident alien who is married to a U. Federal income tax rates 2010 S. Federal income tax rates 2010 citizen or resident alien at the end of the tax year and you and your spouse choose to treat you as a U. Federal income tax rates 2010 S. Federal income tax rates 2010 resident alien. Federal income tax rates 2010 If you make that choice, both you and your spouse are taxed on your worldwide incomes. Federal income tax rates 2010 If you were a nonresident alien at the beginning of the year and a resident alien at the end of the year, and you were married to a U. Federal income tax rates 2010 S. Federal income tax rates 2010 citizen or resident alien at the end of the year, you may be able to choose to be treated as a U. Federal income tax rates 2010 S. Federal income tax rates 2010 resident alien for the entire year. Federal income tax rates 2010 In that case, you may be allowed to take the credit. Federal income tax rates 2010 For information on these choices, see chapter 1 of Publication 519, U. Federal income tax rates 2010 S. Federal income tax rates 2010 Tax Guide for Aliens. Federal income tax rates 2010 Married Persons Generally, if you are married at the end of the tax year, you and your spouse must file a joint return to take the credit. Federal income tax rates 2010 However, if you and your spouse did not live in the same household at any time during the tax year, you can file either a joint return or separate returns and still take the credit. Federal income tax rates 2010 Head of household. Federal income tax rates 2010   You can file as head of household and qualify to take the credit, even if your spouse lived with you during the first 6 months of the year, if you meet certain tests. Federal income tax rates 2010 See Head of Household in chapter 2 for the tests you must meet. Federal income tax rates 2010 Under Age 65 If you are under age 65 at the end of 2013, you can qualify for the credit only if you are retired on permanent and total disability (discussed next) and have taxable disability income (discussed later under Disability income ). Federal income tax rates 2010 You are retired on permanent and total disability if: You were permanently and totally disabled when you retired, and You retired on disability before the close of the tax year. Federal income tax rates 2010 Even if you do not retire formally, you may be considered retired on disability when you have stopped working because of your disability. Federal income tax rates 2010 If you retired on disability before 1977, and were not permanently and totally disabled at the time, you can qualify for the credit if you were permanently and totally disabled on January 1, 1976, or January 1, 1977. Federal income tax rates 2010 Permanent and total disability. Federal income tax rates 2010    You are permanently and totally disabled if you cannot engage in any substantial gainful activity because of your physical or mental condition. Federal income tax rates 2010 A qualified physician must certify that the condition has lasted or can be expected to last continuously for 12 months or more, or that the condition can be expected to result in death. Federal income tax rates 2010 See Physician's statement , later. Federal income tax rates 2010 Substantial gainful activity. Federal income tax rates 2010   Substantial gainful activity is the performance of significant duties over a reasonable period of time while working for pay or profit, or in work generally done for pay or profit. Federal income tax rates 2010 Full-time work (or part-time work done at your employer's convenience) in a competitive work situation for at least the minimum wage conclusively shows that you are able to engage in substantial gainful activity. Federal income tax rates 2010   Substantial gainful activity is not work you do to take care of yourself or your home. Federal income tax rates 2010 It is not unpaid work on hobbies, institutional therapy or training, school attendance, clubs, social programs, and similar activities. Federal income tax rates 2010 However, doing this kind of work may show that you are able to engage in substantial gainful activity. Federal income tax rates 2010    The fact that you have not worked for some time is not, of itself, conclusive evidence that you cannot engage in substantial gainful activity. Federal income tax rates 2010 Sheltered employment. Federal income tax rates 2010   Certain work offered at qualified locations to physically or mentally impaired persons is considered sheltered employment. Federal income tax rates 2010 These qualified locations are in sheltered workshops, hospitals, and similar institutions, homebound programs, and Department of Veterans Affairs (VA) sponsored homes. Federal income tax rates 2010   Compared to commercial employment, pay is lower for sheltered employment. Federal income tax rates 2010 Therefore, one usually does not look for sheltered employment if he or she can get other employment. Federal income tax rates 2010 The fact that one has accepted sheltered employment is not proof of the person's ability to engage in substantial gainful activity. Federal income tax rates 2010 Physician's statement. Federal income tax rates 2010   If you are under age 65, you must have your physician complete a statement certifying that you were permanently and totally disabled on the date you retired. Federal income tax rates 2010 You can use the statement in the Instructions for Schedule R. Federal income tax rates 2010    Figure 33-A. Federal income tax rates 2010 Are You a Qualified Individual? This image is too large to be displayed in the current screen. Federal income tax rates 2010 Please click the link to view the image. Federal income tax rates 2010 Figure 33-A Are You a Qualified Individual?   You do not have to file this statement with your Form 1040 or Form 1040A, but you must keep it for your records. Federal income tax rates 2010 Veterans. Federal income tax rates 2010   If the Department of Veterans Affairs (VA) certifies that you are permanently and totally disabled, you can substitute VA Form 21-0172, Certification of Permanent and Total Disability, for the physician's statement you are required to keep. Federal income tax rates 2010 VA Form 21-0172 must be signed by a person authorized by the VA to do so. Federal income tax rates 2010 You can get this form from your local VA regional office. Federal income tax rates 2010 Physician's statement obtained in earlier year. Federal income tax rates 2010   If you got a physician's statement in an earlier year and, due to your continued disabled condition, you were unable to engage in any substantial gainful activity during 2013, you may not need to get another physician's statement for 2013. Federal income tax rates 2010 For a detailed explanation of the conditions you must meet, see the instructions for Schedule R, Part II. Federal income tax rates 2010 If you meet the required conditions, check the box on your Schedule R, Part II, line 2. Federal income tax rates 2010   If you checked box 4, 5, or 6 in Part I of Schedule R, enter in the space above the box on line 2 in Part II the first name(s) of the spouse(s) for whom the box is checked. Federal income tax rates 2010 Table 33-1. Federal income tax rates 2010 Income Limits IF your filing status is . Federal income tax rates 2010 . Federal income tax rates 2010 . Federal income tax rates 2010 THEN, even if you qualify (see Figure 33-A ), you CANNOT take the credit if. Federal income tax rates 2010 . Federal income tax rates 2010 . Federal income tax rates 2010   Your adjusted gross income (AGI)* is equal to or more than. Federal income tax rates 2010 . Federal income tax rates 2010 . Federal income tax rates 2010     OR the total of your nontaxable social security and other nontaxable pension(s), annuities, or disability income is equal to or more than. Federal income tax rates 2010 . Federal income tax rates 2010 . Federal income tax rates 2010   single, head of household, or qualifying widow(er) with dependent child   $17,500     $5,000   married filing jointly and only one spouse qualifies in Figure 33-A   $20,000     $5,000   married filing jointly and both spouses qualify in Figure 33-A   $25,000     $7,500   married filing separately and you lived apart from your spouse for all of 2013   $12,500     $3,750   * AGI is the amount on Form 1040A, line 22, or Form 1040, line 38. Federal income tax rates 2010 Disability income. Federal income tax rates 2010   If you are under age 65, you must also have taxable disability income to qualify for the credit. Federal income tax rates 2010 Disability income must meet both of the following requirements. Federal income tax rates 2010 It must be paid under your employer's accident or health plan or pension plan. Federal income tax rates 2010 It must be included in your income as wages (or payments instead of wages) for the time you are absent from work because of permanent and total disability. Federal income tax rates 2010 Payments that are not disability income. Federal income tax rates 2010   Any payment you receive from a plan that does not provide for disability retirement is not disability income. Federal income tax rates 2010 Any lump-sum payment for accrued annual leave that you receive when you retire on disability is a salary payment and is not disability income. Federal income tax rates 2010   For purposes of the credit for the elderly or the disabled, disability income does not include amounts you receive after you reach mandatory retirement age. Federal income tax rates 2010 Mandatory retirement age is the age set by your employer at which you would have had to retire, had you not become disabled. Federal income tax rates 2010 Income Limits To determine if you can claim the credit, you must consider two income limits. Federal income tax rates 2010 The first limit is the amount of your adjusted gross income (AGI). Federal income tax rates 2010 The second limit is the amount of nontaxable social security and other nontaxable pensions, annuities, or disability income you received. Federal income tax rates 2010 The limits are shown in Table 33-1. Federal income tax rates 2010 If your AGI and nontaxable pensions, annuities, or disability income are less than the income limits, you may be able to claim the credit. Federal income tax rates 2010 See How to Claim the Credit , later. Federal income tax rates 2010 If either your AGI or your nontaxable pensions, annuities, or disability income are equal to or more than the income limits, you cannot take the credit. Federal income tax rates 2010 How to Claim the Credit You can figure the credit yourself or the Internal Revenue Service will figure it for you. Federal income tax rates 2010 Credit Figured for You If you choose to have the IRS figure the credit for you, read the following discussion for the form you will file (Form 1040 or 1040A). Federal income tax rates 2010 If you want the IRS to figure your tax, see chapter 30. Federal income tax rates 2010 Form 1040. Federal income tax rates 2010   If you want the IRS to figure your credit, see Form 1040 Line Entries under Tax Figured by IRS in chapter 30. Federal income tax rates 2010 Form 1040A. Federal income tax rates 2010   If you want the IRS to figure your credit, see Form 1040A Line Entries under Tax Figured by IRS in chapter 30. Federal income tax rates 2010 Credit Figured by You If you choose to figure the credit yourself, fill out the front of Schedule R. Federal income tax rates 2010 Next, fill out Schedule R, Part III. Federal income tax rates 2010 If you file Form 1040A, enter the amount from Schedule R, line 22, on Form 1040A, line 30. Federal income tax rates 2010 If you file Form 1040, include the amount from Schedule R, line 22, on line 53; check box c, and enter “Sch R” on the line next to that box. Federal income tax rates 2010 For a step-by-step discussion about filling out Part III of Schedule R, see Figuring the Credit Yourself in Publication 524. Federal income tax rates 2010 Limit on credit. Federal income tax rates 2010   The amount of the credit you can claim is generally limited to the amount of your tax. Federal income tax rates 2010 Use the Credit Limit Worksheet in the Instructions for Schedule R to determine if your credit is limited. Federal income tax rates 2010 Prev  Up  Next   Home   More Online Publications
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The Federal Income Tax Rates 2010

Federal income tax rates 2010 Publication 541 - Main Content Table of Contents Forming a PartnershipOrganizations Classified as Partnerships Family Partnership Partnership Agreement Terminating a PartnershipIRS e-file (Electronic Filing) Exclusion From Partnership Rules Partnership Return (Form 1065) Partnership DistributionsSubstantially appreciated inventory items. Federal income tax rates 2010 Partner's Gain or Loss Partner's Basis for Distributed Property Transactions Between Partnership and PartnersGuaranteed Payments Sale or Exchange of Property Contribution of Property Contribution of Services Basis of Partner's InterestAdjusted Basis Effect of Partnership Liabilities Disposition of Partner's InterestSale, Exchange, or Other Transfer Payments for Unrealized Receivables and Inventory Items Liquidation at Partner's Retirement or Death Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)Partnership Item. Federal income tax rates 2010 Small Partnerships and the Small Partnership Exception Small Partnership TEFRA Election Role of Tax Matters Partner (TMP) in TEFRA Proceedings Statute of Limitations and TEFRA Amended Returns and Administrative Adjustment Requests (AARs) How To Get Tax Help Forming a Partnership The following sections contain general information about partnerships. Federal income tax rates 2010 Organizations Classified as Partnerships An unincorporated organization with two or more members is generally classified as a partnership for federal tax purposes if its members carry on a trade, business, financial operation, or venture and divide its profits. Federal income tax rates 2010 However, a joint undertaking merely to share expenses is not a partnership. Federal income tax rates 2010 For example, co-ownership of property maintained and rented or leased is not a partnership unless the co-owners provide services to the tenants. Federal income tax rates 2010 The rules you must use to determine whether an organization is classified as a partnership changed for organizations formed after 1996. Federal income tax rates 2010 Organizations formed after 1996. Federal income tax rates 2010   An organization formed after 1996 is classified as a partnership for federal tax purposes if it has two or more members and it is none of the following. Federal income tax rates 2010 An organization formed under a federal or state law that refers to it as incorporated or as a corporation, body corporate, or body politic. Federal income tax rates 2010 An organization formed under a state law that refers to it as a joint-stock company or joint-stock association. Federal income tax rates 2010 An insurance company. Federal income tax rates 2010 Certain banks. Federal income tax rates 2010 An organization wholly owned by a state, local, or foreign government. Federal income tax rates 2010 An organization specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships). Federal income tax rates 2010 Certain foreign organizations identified in section 301. Federal income tax rates 2010 7701-2(b)(8) of the regulations. Federal income tax rates 2010 A tax-exempt organization. Federal income tax rates 2010 A real estate investment trust. Federal income tax rates 2010 An organization classified as a trust under section 301. Federal income tax rates 2010 7701-4 of the regulations or otherwise subject to special treatment under the Internal Revenue Code. Federal income tax rates 2010 Any other organization that elects to be classified as a corporation by filing Form 8832. Federal income tax rates 2010 For more information, see the instructions for Form 8832. Federal income tax rates 2010 Limited liability company. Federal income tax rates 2010   A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. Federal income tax rates 2010 Unlike a partnership, none of the members of an LLC are personally liable for its debts. Federal income tax rates 2010 An LLC may be classified for federal income tax purposes as either a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in Regulations section 301. Federal income tax rates 2010 7701-3. Federal income tax rates 2010 See Form 8832 and section 301. Federal income tax rates 2010 7701-3 of the regulations for more details. Federal income tax rates 2010 A domestic LLC with at least two members that does not file Form 8832 is classified as a partnership for federal income tax purposes. Federal income tax rates 2010 Organizations formed before 1997. Federal income tax rates 2010   An organization formed before 1997 and classified as a partnership under the old rules will generally continue to be classified as a partnership as long as the organization has at least two members and does not elect to be classified as a corporation by filing Form 8832. Federal income tax rates 2010 Community property. Federal income tax rates 2010    Spouses who own a qualified entity (defined later) can choose to classify the entity as a partnership for federal tax purposes by filing the appropriate partnership tax returns. Federal income tax rates 2010 They can choose to classify the entity as a sole proprietorship by filing a Schedule C (Form 1040) listing one spouse as the sole proprietor. Federal income tax rates 2010 A change in reporting position will be treated for federal tax purposes as a conversion of the entity. Federal income tax rates 2010   A qualified entity is a business entity that meets all the following requirements. Federal income tax rates 2010 The business entity is wholly owned by spouses as community property under the laws of a state, a foreign country, or a possession of the United States. Federal income tax rates 2010 No person other than one or both spouses would be considered an owner for federal tax purposes. Federal income tax rates 2010 The business entity is not treated as a corporation. Federal income tax rates 2010   For more information about community property, see Publication 555, Community Property. Federal income tax rates 2010 Publication 555 discusses the community property laws of Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Federal income tax rates 2010 Family Partnership Members of a family can be partners. Federal income tax rates 2010 However, family members (or any other person) will be recognized as partners only if one of the following requirements is met. Federal income tax rates 2010 If capital is a material income-producing factor, they acquired their capital interest in a bona fide transaction (even if by gift or purchase from another family member), actually own the partnership interest, and actually control the interest. Federal income tax rates 2010 If capital is not a material income-producing factor, they joined together in good faith to conduct a business. Federal income tax rates 2010 They agreed that contributions of each entitle them to a share in the profits, and some capital or service has been (or is) provided by each partner. Federal income tax rates 2010 Capital is material. Federal income tax rates 2010   Capital is a material income-producing factor if a substantial part of the gross income of the business comes from the use of capital. Federal income tax rates 2010 Capital is ordinarily an income-producing factor if the operation of the business requires substantial inventories or investments in plants, machinery, or equipment. Federal income tax rates 2010 Capital is not material. Federal income tax rates 2010   In general, capital is not a material income-producing factor if the income of the business consists principally of fees, commissions, or other compensation for personal services performed by members or employees of the partnership. Federal income tax rates 2010 Capital interest. Federal income tax rates 2010   A capital interest in a partnership is an interest in its assets that is distributable to the owner of the interest in either of the following situations. Federal income tax rates 2010 The owner withdraws from the partnership. Federal income tax rates 2010 The partnership liquidates. Federal income tax rates 2010   The mere right to share in earnings and profits is not a capital interest in the partnership. Federal income tax rates 2010 Gift of capital interest. Federal income tax rates 2010   If a family member (or any other person) receives a gift of a capital interest in a partnership in which capital is a material income-producing factor, the donee's distributive share of partnership income is subject to both of the following restrictions. Federal income tax rates 2010 It must be figured by reducing the partnership income by reasonable compensation for services the donor renders to the partnership. Federal income tax rates 2010 The donee's distributive share of partnership income attributable to donated capital must not be proportionately greater than the donor's distributive share attributable to the donor's capital. Federal income tax rates 2010 Purchase. Federal income tax rates 2010   For purposes of determining a partner's distributive share, an interest purchased by one family member from another family member is considered a gift from the seller. Federal income tax rates 2010 The fair market value of the purchased interest is considered donated capital. Federal income tax rates 2010 For this purpose, members of a family include only spouses, ancestors, and lineal descendants (or a trust for the primary benefit of those persons). Federal income tax rates 2010 Example. Federal income tax rates 2010 A father sold 50% of his business to his son. Federal income tax rates 2010 The resulting partnership had a profit of $60,000. Federal income tax rates 2010 Capital is a material income-producing factor. Federal income tax rates 2010 The father performed services worth $24,000, which is reasonable compensation, and the son performed no services. Federal income tax rates 2010 The $24,000 must be allocated to the father as compensation. Federal income tax rates 2010 Of the remaining $36,000 of profit due to capital, at least 50%, or $18,000, must be allocated to the father since he owns a 50% capital interest. Federal income tax rates 2010 The son's share of partnership profit cannot be more than $18,000. Federal income tax rates 2010 Business owned and operated by spouses. Federal income tax rates 2010   If spouses carry on a business together and share in the profits and losses, they may be partners whether or not they have a formal partnership agreement. Federal income tax rates 2010 If so, they should report income or loss from the business on Form 1065. Federal income tax rates 2010 They should not report the income on a Schedule C (Form 1040) in the name of one spouse as a sole proprietor. Federal income tax rates 2010 However, the spouses can elect not to treat the joint venture as a partnership by making a Qualified Joint Venture Election. Federal income tax rates 2010 Qualified Joint Venture Election. Federal income tax rates 2010   A "qualified joint venture," whose only members are spouses filing a joint return, can elect not to be treated as a partnership for federal tax purposes. Federal income tax rates 2010 A qualified joint venture conducts a trade or business where: the only members of the joint venture are spouses filing jointly; both spouses elect not to be treated as a partnership; both spouses materially participate in the trade or business (see Passive Activity Limitations in the Instructions for Form 1065 for a definition of material participation); and the business is co-owned by both spouses and is not held in the name of a state law entity such as a partnership or LLC. Federal income tax rates 2010   Under this election, a qualified joint venture conducted by spouses who file a joint return is not treated as a partnership for federal tax purposes and therefore does not have a Form 1065 filing requirement. Federal income tax rates 2010 All items of income, gain, deduction, loss, and credit are divided between the spouses based on their respective interests in the venture. Federal income tax rates 2010 Each spouse takes into account his or her respective share of these items as a sole proprietor. Federal income tax rates 2010 Each spouse would account for his or her respective share on the appropriate form, such as Schedule C (Form 1040). Federal income tax rates 2010 For purposes of determining net earnings from self-employment, each spouse's share of income or loss from a qualified joint venture is taken into account just as it is for federal income tax purposes (i. Federal income tax rates 2010 e. Federal income tax rates 2010 , based on their respective interests in the venture). Federal income tax rates 2010   If the spouses do not make the election to treat their respective interests in the joint venture as sole proprietorships, each spouse should carry his or her share of the partnership income or loss from Schedule K-1 (Form 1065) to their joint or separate Form(s) 1040. Federal income tax rates 2010 Each spouse should include his or her respective share of self-employment income on a separate Schedule SE (Form 1040), Self-Employment Tax. Federal income tax rates 2010   This generally does not increase the total tax on the return, but it does give each spouse credit for social security earnings on which retirement benefits are based. Federal income tax rates 2010 However, this may not be true if either spouse exceeds the social security tax limitation. Federal income tax rates 2010   For more information on qualified joint ventures, go to IRS. Federal income tax rates 2010 gov, enter “Election for Qualified Joint Ventures” in the search box and select the link reading “Election for Husband and Wife Unincorporated Businesses. Federal income tax rates 2010 ” Partnership Agreement The partnership agreement includes the original agreement and any modifications. Federal income tax rates 2010 The modifications must be agreed to by all partners or adopted in any other manner provided by the partnership agreement. Federal income tax rates 2010 The agreement or modifications can be oral or written. Federal income tax rates 2010 Partners can modify the partnership agreement for a particular tax year after the close of the year but not later than the date for filing the partnership return for that year. Federal income tax rates 2010 This filing date does not include any extension of time. Federal income tax rates 2010 If the partnership agreement or any modification is silent on any matter, the provisions of local law are treated as part of the agreement. Federal income tax rates 2010 Terminating a Partnership A partnership terminates when one of the following events takes place. Federal income tax rates 2010 All its operations are discontinued and no part of any business, financial operation, or venture is continued by any of its partners in a partnership. Federal income tax rates 2010 At least 50% of the total interest in partnership capital and profits is sold or exchanged within a 12-month period, including a sale or exchange to another partner. Federal income tax rates 2010 Unlike other partnerships, an electing large partnership does not terminate on the sale or exchange of 50% or more of the partnership interests within a 12-month period. Federal income tax rates 2010 See section 1. Federal income tax rates 2010 708-1(b) of the regulations for more information on the termination of a partnership. Federal income tax rates 2010 For special rules that apply to a merger, consolidation, or division of a partnership, see sections 1. Federal income tax rates 2010 708-1(c) and 1. Federal income tax rates 2010 708-1(d) of the regulations. Federal income tax rates 2010 Date of termination. Federal income tax rates 2010   The partnership's tax year ends on the date of termination. Federal income tax rates 2010 For the event described in (1), above, the date of termination is the date the partnership completes the winding up of its affairs. Federal income tax rates 2010 For the event described in (2), above, the date of termination is the date of the sale or exchange of a partnership interest that, by itself or together with other sales or exchanges in the preceding 12 months, transfers an interest of 50% or more in both capital and profits. Federal income tax rates 2010 Short period return. Federal income tax rates 2010   If a partnership is terminated before the end of what would otherwise be its tax year, Form 1065 must be filed for the short period, which is the period from the beginning of the tax year through the date of termination. Federal income tax rates 2010 The return is due the 15th day of the fourth month following the date of termination. Federal income tax rates 2010 See Partnership Return (Form 1065), later, for information about filing Form 1065. Federal income tax rates 2010 Conversion of partnership into limited liability company (LLC). Federal income tax rates 2010   The conversion of a partnership into an LLC classified as a partnership for federal tax purposes does not terminate the partnership. Federal income tax rates 2010 The conversion is not a sale, exchange, or liquidation of any partnership interest; the partnership's tax year does not close; and the LLC can continue to use the partnership's taxpayer identification number. Federal income tax rates 2010   However, the conversion may change some of the partners' bases in their partnership interests if the partnership has recourse liabilities that become nonrecourse liabilities. Federal income tax rates 2010 Because the partners share recourse and nonrecourse liabilities differently, their bases must be adjusted to reflect the new sharing ratios. Federal income tax rates 2010 If a decrease in a partner's share of liabilities exceeds the partner's basis, he or she must recognize gain on the excess. Federal income tax rates 2010 For more information, see Effect of Partnership Liabilities under Basis of Partner's Interest, later. Federal income tax rates 2010   The same rules apply if an LLC classified as a partnership is converted into a partnership. Federal income tax rates 2010 IRS e-file (Electronic Filing) Please click here for the text description of the image. Federal income tax rates 2010 e-file Certain partnerships with more than 100 partners are required to file Form 1065, Schedules K-1, and related forms and schedules electronically (e-file). Federal income tax rates 2010 Other partnerships generally have the option to file electronically. Federal income tax rates 2010 For details about IRS e-file, see the Form 1065 instructions. Federal income tax rates 2010 Exclusion From Partnership Rules Certain partnerships that do not actively conduct a business can choose to be completely or partially excluded from being treated as partnerships for federal income tax purposes. Federal income tax rates 2010 All the partners must agree to make the choice, and the partners must be able to compute their own taxable income without computing the partnership's income. Federal income tax rates 2010 However, the partners are not exempt from the rule that limits a partner's distributive share of partnership loss to the adjusted basis of the partner's partnership interest. Federal income tax rates 2010 Nor are they exempt from the requirement of a business purpose for adopting a tax year for the partnership that differs from its required tax year. Federal income tax rates 2010 Investing partnership. Federal income tax rates 2010   An investing partnership can be excluded if the participants in the joint purchase, retention, sale, or exchange of investment property meet all the following requirements. Federal income tax rates 2010 They own the property as co-owners. Federal income tax rates 2010 They reserve the right separately to take or dispose of their shares of any property acquired or retained. Federal income tax rates 2010 They do not actively conduct business or irrevocably authorize some person acting in a representative capacity to purchase, sell, or exchange the investment property. Federal income tax rates 2010 Each separate participant can delegate authority to purchase, sell, or exchange his or her share of the investment property for the time being for his or her account, but not for a period of more than a year. Federal income tax rates 2010 Operating agreement partnership. Federal income tax rates 2010   An operating agreement partnership group can be excluded if the participants in the joint production, extraction, or use of property meet all the following requirements. Federal income tax rates 2010 They own the property as co-owners, either in fee or under lease or other form of contract granting exclusive operating rights. Federal income tax rates 2010 They reserve the right separately to take in kind or dispose of their shares of any property produced, extracted, or used. Federal income tax rates 2010 They do not jointly sell services or the property produced or extracted. Federal income tax rates 2010 Each separate participant can delegate authority to sell his or her share of the property produced or extracted for the time being for his or her account, but not for a period of time in excess of the minimum needs of the industry, and in no event for more than one year. Federal income tax rates 2010 However, this exclusion does not apply to an unincorporated organization one of whose principal purposes is cycling, manufacturing, or processing for persons who are not members of the organization. Federal income tax rates 2010 Electing the exclusion. Federal income tax rates 2010   An eligible organization that wishes to be excluded from the partnership rules must make the election not later than the time for filing the partnership return for the first tax year for which exclusion is desired. Federal income tax rates 2010 This filing date includes any extension of time. Federal income tax rates 2010 See Regulations section 1. Federal income tax rates 2010 761-2(b) for the procedures to follow. Federal income tax rates 2010 Partnership Return (Form 1065) Every partnership that engages in a trade or business or has gross income must file an information return on Form 1065 showing its income, deductions, and other required information. Federal income tax rates 2010 The partnership return must show the names and addresses of each partner and each partner's distributive share of taxable income. Federal income tax rates 2010 The return must be signed by a general partner. Federal income tax rates 2010 If a limited liability company is treated as a partnership, it must file Form 1065 and one of its members must sign the return. Federal income tax rates 2010 A partnership is not considered to engage in a trade or business, and is not required to file a Form 1065, for any tax year in which it neither receives income nor pays or incurs any expenses treated as deductions or credits for federal income tax purposes. Federal income tax rates 2010 See the Instructions for Form 1065 for more information about who must file Form 1065. Federal income tax rates 2010 Partnership Distributions Partnership distributions include the following. Federal income tax rates 2010 A withdrawal by a partner in anticipation of the current year's earnings. Federal income tax rates 2010 A distribution of the current year's or prior years' earnings not needed for working capital. Federal income tax rates 2010 A complete or partial liquidation of a partner's interest. Federal income tax rates 2010 A distribution to all partners in a complete liquidation of the partnership. Federal income tax rates 2010 A partnership distribution is not taken into account in determining the partner's distributive share of partnership income or loss. Federal income tax rates 2010 If any gain or loss from the distribution is recognized by the partner, it must be reported on his or her return for the tax year in which the distribution is received. Federal income tax rates 2010 Money or property withdrawn by a partner in anticipation of the current year's earnings is treated as a distribution received on the last day of the partnership's tax year. Federal income tax rates 2010 Effect on partner's basis. Federal income tax rates 2010   A partner's adjusted basis in his or her partnership interest is decreased (but not below zero) by the money and adjusted basis of property distributed to the partner. Federal income tax rates 2010 See Adjusted Basis under Basis of Partner's Interest, later. Federal income tax rates 2010 Effect on partnership. Federal income tax rates 2010   A partnership generally does not recognize any gain or loss because of distributions it makes to partners. Federal income tax rates 2010 The partnership may be able to elect to adjust the basis of its undistributed property. Federal income tax rates 2010 Certain distributions treated as a sale or exchange. Federal income tax rates 2010   When a partnership distributes the following items, the distribution may be treated as a sale or exchange of property rather than a distribution. Federal income tax rates 2010 Unrealized receivables or substantially appreciated inventory items distributed in exchange for any part of the partner's interest in other partnership property, including money. Federal income tax rates 2010 Other property (including money) distributed in exchange for any part of a partner's interest in unrealized receivables or substantially appreciated inventory items. Federal income tax rates 2010   See Payments for Unrealized Receivables and Inventory Items under Disposition of Partner's Interest, later. Federal income tax rates 2010   This treatment does not apply to the following distributions. Federal income tax rates 2010 A distribution of property to the partner who contributed the property to the partnership. Federal income tax rates 2010 Payments made to a retiring partner or successor in interest of a deceased partner that are the partner's distributive share of partnership income or guaranteed payments. Federal income tax rates 2010 Substantially appreciated inventory items. Federal income tax rates 2010   Inventory items of the partnership are considered to have appreciated substantially in value if, at the time of the distribution, their total fair market value is more than 120% of the partnership's adjusted basis for the property. Federal income tax rates 2010 However, if a principal purpose for acquiring inventory property is to avoid ordinary income treatment by reducing the appreciation to less than 120%, that property is excluded. Federal income tax rates 2010 Partner's Gain or Loss A partner generally recognizes gain on a partnership distribution only to the extent any money (and marketable securities treated as money) included in the distribution exceeds the adjusted basis of the partner's interest in the partnership. Federal income tax rates 2010 Any gain recognized is generally treated as capital gain from the sale of the partnership interest on the date of the distribution. Federal income tax rates 2010 If partnership property (other than marketable securities treated as money) is distributed to a partner, he or she generally does not recognize any gain until the sale or other disposition of the property. Federal income tax rates 2010 For exceptions to these rules, see Distribution of partner's debt and Net precontribution gain, later. Federal income tax rates 2010 Also, see Payments for Unrealized Receivables and Inventory Items under Disposition of Partner's Interest, later. Federal income tax rates 2010 Example. Federal income tax rates 2010 The adjusted basis of Jo's partnership interest is $14,000. Federal income tax rates 2010 She receives a distribution of $8,000 cash and land that has an adjusted basis of $2,000 and a fair market value of $3,000. Federal income tax rates 2010 Because the cash received does not exceed the basis of her partnership interest, Jo does not recognize any gain on the distribution. Federal income tax rates 2010 Any gain on the land will be recognized when she sells or otherwise disposes of it. Federal income tax rates 2010 The distribution decreases the adjusted basis of Jo's partnership interest to $4,000 [$14,000 − ($8,000 + $2,000)]. Federal income tax rates 2010 Marketable securities treated as money. Federal income tax rates 2010   Generally, a marketable security distributed to a partner is treated as money in determining whether gain is recognized on the distribution. Federal income tax rates 2010 This treatment, however, does not generally apply if that partner contributed the security to the partnership or an investment partnership made the distribution to an eligible partner. Federal income tax rates 2010   The amount treated as money is the security's fair market value when distributed, reduced (but not below zero) by the excess (if any) of: The partner's distributive share of the gain that would be recognized had the partnership sold all its marketable securities at their fair market value immediately before the transaction resulting in the distribution, over The partner's distributive share of the gain that would be recognized had the partnership sold all such securities it still held after the distribution at the fair market value in (1). Federal income tax rates 2010   For more information, including the definition of marketable securities, see section 731(c) of the Internal Revenue Code. Federal income tax rates 2010 Loss on distribution. Federal income tax rates 2010   A partner does not recognize loss on a partnership distribution unless all the following requirements are met. Federal income tax rates 2010 The adjusted basis of the partner's interest in the partnership exceeds the distribution. Federal income tax rates 2010 The partner's entire interest in the partnership is liquidated. Federal income tax rates 2010 The distribution is in money, unrealized receivables, or inventory items. Federal income tax rates 2010   There are exceptions to these general rules. Federal income tax rates 2010 See the following discussions. Federal income tax rates 2010 Also, see Liquidation at Partner's Retirement or Death under Disposition of Partner's Interest, later. Federal income tax rates 2010 Distribution of partner's debt. Federal income tax rates 2010   If a partnership acquires a partner's debt and extinguishes the debt by distributing it to the partner, the partner will recognize capital gain or loss to the extent the fair market value of the debt differs from the basis of the debt (determined under the rules discussed in Partner's Basis for Distributed Property, later). Federal income tax rates 2010   The partner is treated as having satisfied the debt for its fair market value. Federal income tax rates 2010 If the issue price (adjusted for any premium or discount) of the debt exceeds its fair market value when distributed, the partner may have to include the excess amount in income as canceled debt. Federal income tax rates 2010   Similarly, a deduction may be available to a corporate partner if the fair market value of the debt at the time of distribution exceeds its adjusted issue price. Federal income tax rates 2010 Net precontribution gain. Federal income tax rates 2010   A partner generally must recognize gain on the distribution of property (other than money) if the partner contributed appreciated property to the partnership during the 7-year period before the distribution. Federal income tax rates 2010   The gain recognized is the lesser of the following amounts. Federal income tax rates 2010 The excess of: The fair market value of the property received in the distribution, over The adjusted basis of the partner's interest in the partnership immediately before the distribution, reduced (but not below zero) by any money received in the distribution. Federal income tax rates 2010 The “net precontribution gain” of the partner. Federal income tax rates 2010 This is the net gain the partner would recognize if all the property contributed by the partner within 7 years of the distribution, and held by the partnership immediately before the distribution, were distributed to another partner, other than a partner who owns more than 50% of the partnership. Federal income tax rates 2010 For information about the distribution of contributed property to another partner, see Contribution of Property , under Transactions Between Partnership and Partners, later. Federal income tax rates 2010   The character of the gain is determined by reference to the character of the net precontribution gain. Federal income tax rates 2010 This gain is in addition to any gain the partner must recognize if the money distributed is more than his or her basis in the partnership. Federal income tax rates 2010 For these rules, the term “money” includes marketable securities treated as money, as discussed earlier. Federal income tax rates 2010 Effect on basis. Federal income tax rates 2010   The adjusted basis of the partner's interest in the partnership is increased by any net precontribution gain recognized by the partner. Federal income tax rates 2010 Other than for purposes of determining the gain, the increase is treated as occurring immediately before the distribution. Federal income tax rates 2010 See Basis of Partner's Interest , later. Federal income tax rates 2010   The partnership must adjust its basis in any property the partner contributed within 7 years of the distribution to reflect any gain that partner recognizes under this rule. Federal income tax rates 2010 Exceptions. Federal income tax rates 2010   Any part of a distribution that is property the partner previously contributed to the partnership is not taken into account in determining the amount of the excess distribution or the partner's net precontribution gain. Federal income tax rates 2010 For this purpose, the partner's previously contributed property does not include a contributed interest in an entity to the extent its value is due to property contributed to the entity after the interest was contributed to the partnership. Federal income tax rates 2010   Recognition of gain under this rule also does not apply to a distribution of unrealized receivables or substantially appreciated inventory items if the distribution is treated as a sale or exchange, as discussed earlier. Federal income tax rates 2010 Partner's Basis for Distributed Property Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed to the partner by a partnership is its adjusted basis to the partnership immediately before the distribution. Federal income tax rates 2010 However, the basis of the property to the partner cannot be more than the adjusted basis of his or her interest in the partnership reduced by any money received in the same transaction. Federal income tax rates 2010 Example 1. Federal income tax rates 2010 The adjusted basis of Emily's partnership interest is $30,000. Federal income tax rates 2010 She receives a distribution of property that has an adjusted basis of $20,000 to the partnership and $4,000 in cash. Federal income tax rates 2010 Her basis for the property is $20,000. Federal income tax rates 2010 Example 2. Federal income tax rates 2010 The adjusted basis of Steve's partnership interest is $10,000. Federal income tax rates 2010 He receives a distribution of $4,000 cash and property that has an adjusted basis to the partnership of $8,000. Federal income tax rates 2010 His basis for the distributed property is limited to $6,000 ($10,000 − $4,000, the cash he receives). Federal income tax rates 2010 Complete liquidation of partner's interest. Federal income tax rates 2010   The basis of property received in complete liquidation of a partner's interest is the adjusted basis of the partner's interest in the partnership reduced by any money distributed to the partner in the same transaction. Federal income tax rates 2010 Partner's holding period. Federal income tax rates 2010   A partner's holding period for property distributed to the partner includes the period the property was held by the partnership. Federal income tax rates 2010 If the property was contributed to the partnership by a partner, then the period it was held by that partner is also included. Federal income tax rates 2010 Basis divided among properties. Federal income tax rates 2010   If the basis of property received is the adjusted basis of the partner's interest in the partnership (reduced by money received in the same transaction), it must be divided among the properties distributed to the partner. Federal income tax rates 2010 For property distributed after August 5, 1997, allocate the basis using the following rules. Federal income tax rates 2010 Allocate the basis first to unrealized receivables and inventory items included in the distribution by assigning a basis to each item equal to the partnership's adjusted basis in the item immediately before the distribution. Federal income tax rates 2010 If the total of these assigned bases exceeds the allocable basis, decrease the assigned bases by the amount of the excess. Federal income tax rates 2010 Allocate any remaining basis to properties other than unrealized receivables and inventory items by assigning a basis to each property equal to the partnership's adjusted basis in the property immediately before the distribution. Federal income tax rates 2010 If the allocable basis exceeds the total of these assigned bases, increase the assigned bases by the amount of the excess. Federal income tax rates 2010 If the total of these assigned bases exceeds the allocable basis, decrease the assigned bases by the amount of the excess. Federal income tax rates 2010 Allocating a basis increase. Federal income tax rates 2010   Allocate any basis increase required in rule (2), above, first to properties with unrealized appreciation to the extent of the unrealized appreciation. Federal income tax rates 2010 If the basis increase is less than the total unrealized appreciation, allocate it among those properties in proportion to their respective amounts of unrealized appreciation. Federal income tax rates 2010 Allocate any remaining basis increase among all the properties in proportion to their respective fair market values. Federal income tax rates 2010 Example. Federal income tax rates 2010 Eun's basis in her partnership interest is $55,000. Federal income tax rates 2010 In a distribution in liquidation of her entire interest, she receives properties A and B, neither of which is inventory or unrealized receivables. Federal income tax rates 2010 Property A has an adjusted basis to the partnership of $5,000 and a fair market value of $40,000. Federal income tax rates 2010 Property B has an adjusted basis to the partnership of $10,000 and a fair market value of $10,000. Federal income tax rates 2010 To figure her basis in each property, Eun first assigns bases of $5,000 to property A and $10,000 to property B (their adjusted bases to the partnership). Federal income tax rates 2010 This leaves a $40,000 basis increase (the $55,000 allocable basis minus the $15,000 total of the assigned bases). Federal income tax rates 2010 She first allocates $35,000 to property A (its unrealized appreciation). Federal income tax rates 2010 The remaining $5,000 is allocated between the properties based on their fair market values. Federal income tax rates 2010 $4,000 ($40,000/$50,000) is allocated to property A and $1,000 ($10,000/$50,000) is allocated to property B. Federal income tax rates 2010 Eun's basis in property A is $44,000 ($5,000 + $35,000 + $4,000) and her basis in property B is $11,000 ($10,000 + $1,000). Federal income tax rates 2010 Allocating a basis decrease. Federal income tax rates 2010   Use the following rules to allocate any basis decrease required in rule (1) or rule (2), earlier. Federal income tax rates 2010 Allocate the basis decrease first to items with unrealized depreciation to the extent of the unrealized depreciation. Federal income tax rates 2010 If the basis decrease is less than the total unrealized depreciation, allocate it among those items in proportion to their respective amounts of unrealized depreciation. Federal income tax rates 2010 Allocate any remaining basis decrease among all the items in proportion to their respective assigned basis amounts (as decreased in (1)). Federal income tax rates 2010 Example. Federal income tax rates 2010 Armando's basis in his partnership interest is $20,000. Federal income tax rates 2010 In a distribution in liquidation of his entire interest, he receives properties C and D, neither of which is inventory or unrealized receivables. Federal income tax rates 2010 Property C has an adjusted basis to the partnership of $15,000 and a fair market value of $15,000. Federal income tax rates 2010 Property D has an adjusted basis to the partnership of $15,000 and a fair market value of $5,000. Federal income tax rates 2010 To figure his basis in each property, Armando first assigns bases of $15,000 to property C and $15,000 to property D (their adjusted bases to the partnership). Federal income tax rates 2010 This leaves a $10,000 basis decrease (the $30,000 total of the assigned bases minus the $20,000 allocable basis). Federal income tax rates 2010 He allocates the entire $10,000 to property D (its unrealized depreciation). Federal income tax rates 2010 Armando's basis in property C is $15,000 and his basis in property D is $5,000 ($15,000 − $10,000). Federal income tax rates 2010 Distributions before August 6, 1997. Federal income tax rates 2010   For property distributed before August 6, 1997, allocate the basis using the following rules. Federal income tax rates 2010 Allocate the basis first to unrealized receivables and inventory items included in the distribution to the extent of the partnership's adjusted basis in those items. Federal income tax rates 2010 If the partnership's adjusted basis in those items exceeded the allocable basis, allocate the basis among the items in proportion to their adjusted bases to the partnership. Federal income tax rates 2010 Allocate any remaining basis to other distributed properties in proportion to their adjusted bases to the partnership. Federal income tax rates 2010 Partner's interest more than partnership basis. Federal income tax rates 2010   If the basis of a partner's interest to be divided in a complete liquidation of the partner's interest is more than the partnership's adjusted basis for the unrealized receivables and inventory items distributed, and if no other property is distributed to which the partner can apply the remaining basis, the partner has a capital loss to the extent of the remaining basis of the partnership interest. Federal income tax rates 2010 Special adjustment to basis. Federal income tax rates 2010   A partner who acquired any part of his or her partnership interest in a sale or exchange or upon the death of another partner may be able to choose a special basis adjustment for property distributed by the partnership. Federal income tax rates 2010 To choose the special adjustment, the partner must have received the distribution within 2 years after acquiring the partnership interest. Federal income tax rates 2010 Also, the partnership must not have chosen the optional adjustment to basis when the partner acquired the partnership interest. Federal income tax rates 2010   If a partner chooses this special basis adjustment, the partner's basis for the property distributed is the same as it would have been if the partnership had chosen the optional adjustment to basis. Federal income tax rates 2010 However, this assigned basis is not reduced by any depletion or depreciation that would have been allowed or allowable if the partnership had previously chosen the optional adjustment. Federal income tax rates 2010   The choice must be made with the partner's tax return for the year of the distribution if the distribution includes any property subject to depreciation, depletion, or amortization. Federal income tax rates 2010 If the choice does not have to be made for the distribution year, it must be made with the return for the first year in which the basis of the distributed property is pertinent in determining the partner's income tax. Federal income tax rates 2010   A partner choosing this special basis adjustment must attach a statement to his or her tax return that the partner chooses under section 732(d) of the Internal Revenue Code to adjust the basis of property received in a distribution. Federal income tax rates 2010 The statement must show the computation of the special basis adjustment for the property distributed and list the properties to which the adjustment has been allocated. Federal income tax rates 2010 Example. Federal income tax rates 2010 Chin Ho purchased a 25% interest in X partnership for $17,000 cash. Federal income tax rates 2010 At the time of the purchase, the partnership owned inventory having a basis to the partnership of $14,000 and a fair market value of $16,000. Federal income tax rates 2010 Thus, $4,000 of the $17,000 he paid was attributable to his share of inventory with a basis to the partnership of $3,500. Federal income tax rates 2010 Within 2 years after acquiring his interest, Chin Ho withdrew from the partnership and for his entire interest received cash of $1,500, inventory with a basis to the partnership of $3,500, and other property with a basis of $6,000. Federal income tax rates 2010 The value of the inventory received was 25% of the value of all partnership inventory. Federal income tax rates 2010 (It is immaterial whether the inventory he received was on hand when he acquired his interest. Federal income tax rates 2010 ) Since the partnership from which Chin Ho withdrew did not make the optional adjustment to basis, he chose to adjust the basis of the inventory received. Federal income tax rates 2010 His share of the partnership's basis for the inventory is increased by $500 (25% of the $2,000 difference between the $16,000 fair market value of the inventory and its $14,000 basis to the partnership at the time he acquired his interest). Federal income tax rates 2010 The adjustment applies only for purposes of determining his new basis in the inventory, and not for purposes of partnership gain or loss on disposition. Federal income tax rates 2010 The total to be allocated among the properties Chin Ho received in the distribution is $15,500 ($17,000 basis of his interest − $1,500 cash received). Federal income tax rates 2010 His basis in the inventory items is $4,000 ($3,500 partnership basis + $500 special adjustment). Federal income tax rates 2010 The remaining $11,500 is allocated to his new basis for the other property he received. Federal income tax rates 2010 Mandatory adjustment. Federal income tax rates 2010   A partner does not always have a choice of making this special adjustment to basis. Federal income tax rates 2010 The special adjustment to basis must be made for a distribution of property (whether or not within 2 years after the partnership interest was acquired) if all the following conditions existed when the partner received the partnership interest. Federal income tax rates 2010 The fair market value of all partnership property (other than money) was more than 110% of its adjusted basis to the partnership. Federal income tax rates 2010 If there had been a liquidation of the partner's interest immediately after it was acquired, an allocation of the basis of that interest under the general rules (discussed earlier under Basis divided among properties) would have decreased the basis of property that could not be depreciated, depleted, or amortized and increased the basis of property that could be. Federal income tax rates 2010 The optional basis adjustment, if it had been chosen by the partnership, would have changed the partner's basis for the property actually distributed. Federal income tax rates 2010 Required statement. Federal income tax rates 2010   Generally, if a partner chooses a special basis adjustment and notifies the partnership, or if the partnership makes a distribution for which the special basis adjustment is mandatory, the partnership must provide a statement to the partner. Federal income tax rates 2010 The statement must provide information necessary for the partner to compute the special basis adjustment. Federal income tax rates 2010 Marketable securities. Federal income tax rates 2010   A partner's basis in marketable securities received in a partnership distribution, as determined in the preceding discussions, is increased by any gain recognized by treating the securities as money. Federal income tax rates 2010 See Marketable securities treated as money under Partner's Gain or Loss, earlier. Federal income tax rates 2010 The basis increase is allocated among the securities in proportion to their respective amounts of unrealized appreciation before the basis increase. Federal income tax rates 2010 Transactions Between Partnership and Partners For certain transactions between a partner and his or her partnership, the partner is treated as not being a member of the partnership. Federal income tax rates 2010 These transactions include the following. Federal income tax rates 2010 Performing services for, or transferring property to, a partnership if: There is a related allocation and distribution to a partner, and The entire transaction, when viewed together, is properly characterized as occurring between the partnership and a partner not acting in the capacity of a partner. Federal income tax rates 2010 Transferring money or other property to a partnership if: There is a related transfer of money or other property by the partnership to the contributing partner or another partner, and The transfers together are properly characterized as a sale or exchange of property. Federal income tax rates 2010 Payments by accrual basis partnership to cash basis partner. Federal income tax rates 2010   A partnership that uses an accrual method of accounting cannot deduct any business expense owed to a cash basis partner until the amount is paid. Federal income tax rates 2010 However, this rule does not apply to guaranteed payments made to a partner, which are generally deductible when accrued. Federal income tax rates 2010 Guaranteed Payments Guaranteed payments are those made by a partnership to a partner that are determined without regard to the partnership's income. Federal income tax rates 2010 A partnership treats guaranteed payments for services, or for the use of capital, as if they were made to a person who is not a partner. Federal income tax rates 2010 This treatment is for purposes of determining gross income and deductible business expenses only. Federal income tax rates 2010 For other tax purposes, guaranteed payments are treated as a partner's distributive share of ordinary income. Federal income tax rates 2010 Guaranteed payments are not subject to income tax withholding. Federal income tax rates 2010 The partnership generally deducts guaranteed payments on line 10 of Form 1065 as a business expense. Federal income tax rates 2010 They are also listed on Schedules K and K-1 of the partnership return. Federal income tax rates 2010 The individual partner reports guaranteed payments on Schedule E (Form 1040) as ordinary income, along with his or her distributive share of the partnership's other ordinary income. Federal income tax rates 2010 Guaranteed payments made to partners for organizing the partnership or syndicating interests in the partnership are capital expenses. Federal income tax rates 2010 Generally, organizational and syndication expenses are not deductible by the partnership. Federal income tax rates 2010 However, a partnership can elect to deduct a portion of its organizational expenses and amortize the remaining expenses (see Business start-up and organizational costs in the Instructions for Form 1065). Federal income tax rates 2010 Organizational expenses (if the election is not made) and syndication expenses paid to partners must be reported on the partners' Schedule K-1 as guaranteed payments. Federal income tax rates 2010 Minimum payment. Federal income tax rates 2010   If a partner is to receive a minimum payment from the partnership, the guaranteed payment is the amount by which the minimum payment is more than the partner's distributive share of the partnership income before taking into account the guaranteed payment. Federal income tax rates 2010 Example. Federal income tax rates 2010 Under a partnership agreement, Divya is to receive 30% of the partnership income, but not less than $8,000. Federal income tax rates 2010 The partnership has net income of $20,000. Federal income tax rates 2010 Divya's share, without regard to the minimum guarantee, is $6,000 (30% × $20,000). Federal income tax rates 2010 The guaranteed payment that can be deducted by the partnership is $2,000 ($8,000 − $6,000). Federal income tax rates 2010 Divya's income from the partnership is $8,000, and the remaining $12,000 of partnership income will be reported by the other partners in proportion to their shares under the partnership agreement. Federal income tax rates 2010 If the partnership net income had been $30,000, there would have been no guaranteed payment since her share, without regard to the guarantee, would have been greater than the guarantee. Federal income tax rates 2010 Self-employed health insurance premiums. Federal income tax rates 2010   Premiums for health insurance paid by a partnership on behalf of a partner, for services as a partner, are treated as guaranteed payments. Federal income tax rates 2010 The partnership can deduct the payments as a business expense, and the partner must include them in gross income. Federal income tax rates 2010 However, if the partnership accounts for insurance paid for a partner as a reduction in distributions to the partner, the partnership cannot deduct the premiums. Federal income tax rates 2010   A partner who qualifies can deduct 100% of the health insurance premiums paid by the partnership on his or her behalf as an adjustment to income. Federal income tax rates 2010 The partner cannot deduct the premiums for any calendar month, or part of a month, in which the partner is eligible to participate in any subsidized health plan maintained by any employer of the partner, the partner's spouse, the partner's dependents, or any children under age 27 who are not dependents. Federal income tax rates 2010 For more information on the self-employed health insurance deduction, see chapter 6 in Publication 535. Federal income tax rates 2010 Including payments in partner's income. Federal income tax rates 2010   Guaranteed payments are included in income in the partner's tax year in which the partnership's tax year ends. Federal income tax rates 2010 Example 1. Federal income tax rates 2010 Under the terms of a partnership agreement, Erica is entitled to a fixed annual payment of $10,000 without regard to the income of the partnership. Federal income tax rates 2010 Her distributive share of the partnership income is 10%. Federal income tax rates 2010 The partnership has $50,000 of ordinary income after deducting the guaranteed payment. Federal income tax rates 2010 She must include ordinary income of $15,000 ($10,000 guaranteed payment + $5,000 ($50,000 × 10%) distributive share) on her individual income tax return for her tax year in which the partnership's tax year ends. Federal income tax rates 2010 Example 2. Federal income tax rates 2010 Lamont is a calendar year taxpayer who is a partner in a partnership. Federal income tax rates 2010 The partnership uses a fiscal year that ended January 31, 2013. Federal income tax rates 2010 Lamont received guaranteed payments from the partnership from February 1, 2012, until December 31, 2012. Federal income tax rates 2010 He must include these guaranteed payments in income for 2013 and report them on his 2013 income tax return. Federal income tax rates 2010 Payments resulting in loss. Federal income tax rates 2010   If guaranteed payments to a partner result in a partnership loss in which the partner shares, the partner must report the full amount of the guaranteed payments as ordinary income. Federal income tax rates 2010 The partner separately takes into account his or her distributive share of the partnership loss, to the extent of the adjusted basis of the partner's partnership interest. Federal income tax rates 2010 Sale or Exchange of Property Special rules apply to a sale or exchange of property between a partnership and certain persons. Federal income tax rates 2010 Losses. Federal income tax rates 2010   Losses will not be allowed from a sale or exchange of property (other than an interest in the partnership) directly or indirectly between a partnership and a person whose direct or indirect interest in the capital or profits of the partnership is more than 50%. Federal income tax rates 2010   If the sale or exchange is between two partnerships in which the same persons directly or indirectly own more than 50% of the capital or profits interests in each partnership, no deduction of a loss is allowed. Federal income tax rates 2010   The basis of each partner's interest in the partnership is decreased (but not below zero) by the partner's share of the disallowed loss. Federal income tax rates 2010   If the purchaser later sells the property, only the gain realized that is greater than the loss not allowed will be taxable. Federal income tax rates 2010 If any gain from the sale of the property is not recognized because of this rule, the basis of each partner's interest in the partnership is increased by the partner's share of that gain. Federal income tax rates 2010 Gains. Federal income tax rates 2010   Gains are treated as ordinary income in a sale or exchange of property directly or indirectly between a person and a partnership, or between two partnerships, if both of the following tests are met. Federal income tax rates 2010 More than 50% of the capital or profits interest in the partnership(s) is directly or indirectly owned by the same person(s). Federal income tax rates 2010 The property in the hands of the transferee immediately after the transfer is not a capital asset. Federal income tax rates 2010 Property that is not a capital asset includes accounts receivable, inventory, stock-in-trade, and depreciable or real property used in a trade or business. Federal income tax rates 2010 More than 50% ownership. Federal income tax rates 2010   To determine if there is more than 50% ownership in partnership capital or profits, the following rules apply. Federal income tax rates 2010 An interest directly or indirectly owned by, or for, a corporation, partnership, estate, or trust is considered to be owned proportionately by, or for, its shareholders, partners, or beneficiaries. Federal income tax rates 2010 An individual is considered to own the interest directly or indirectly owned by, or for, the individual's family. Federal income tax rates 2010 For this rule, “family” includes only brothers, sisters, half-brothers, half-sisters, spouses, ancestors, and lineal descendants. Federal income tax rates 2010 If a person is considered to own an interest using rule (1), that person (the “constructive owner”) is treated as if actually owning that interest when rules (1) and (2) are applied. Federal income tax rates 2010 However, if a person is considered to own an interest using rule (2), that person is not treated as actually owning that interest in reapplying rule (2) to make another person the constructive owner. Federal income tax rates 2010 Example. Federal income tax rates 2010 Individuals A and B and Trust T are equal partners in Partnership ABT. Federal income tax rates 2010 A's husband, AH, is the sole beneficiary of Trust T. Federal income tax rates 2010 Trust T's partnership interest will be attributed to AH only for the purpose of further attributing the interest to A. Federal income tax rates 2010 As a result, A is a more-than-50% partner. Federal income tax rates 2010 This means that any deduction for losses on transactions between her and ABT will not be allowed, and gain from property that in the hands of the transferee is not a capital asset is treated as ordinary, rather than capital, gain. Federal income tax rates 2010 More information. Federal income tax rates 2010   For more information on these special rules, see Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Federal income tax rates 2010 Contribution of Property Usually, neither the partner nor the partnership recognizes a gain or loss when property is contributed to the partnership in exchange for a partnership interest. Federal income tax rates 2010 This applies whether a partnership is being formed or is already operating. Federal income tax rates 2010 The partnership's holding period for the property includes the partner's holding period. Federal income tax rates 2010 The contribution of limited partnership interests in one partnership for limited partnership interests in another partnership qualifies as a tax-free contribution of property to the second partnership if the transaction is made for business purposes. Federal income tax rates 2010 The exchange is not subject to the rules explained later under Disposition of Partner's Interest. Federal income tax rates 2010 Disguised sales. Federal income tax rates 2010   A contribution of money or other property to the partnership followed by a distribution of different property from the partnership to the partner is treated not as a contribution and distribution, but as a sale of property, if both of the following tests are met. Federal income tax rates 2010 The distribution would not have been made but for the contribution. Federal income tax rates 2010 The partner's right to the distribution does not depend on the success of partnership operations. Federal income tax rates 2010   All facts and circumstances are considered in determining if the contribution and distribution are more properly characterized as a sale. Federal income tax rates 2010 However, if the contribution and distribution occur within 2 years of each other, the transfers are presumed to be a sale unless the facts clearly indicate that the transfers are not a sale. Federal income tax rates 2010 If the contribution and distribution occur more than 2 years apart, the transfers are presumed not to be a sale unless the facts clearly indicate that the transfers are a sale. Federal income tax rates 2010 Form 8275 required. Federal income tax rates 2010   A partner must attach Form 8275, Disclosure Statement, (or other statement) to his or her return if the partner contributes property to a partnership and, within 2 years (before or after the contribution), the partnership transfers money or other consideration to the partner. Federal income tax rates 2010 For exceptions to this requirement, see section 1. Federal income tax rates 2010 707-3(c)(2) of the regulations. Federal income tax rates 2010   A partnership must attach Form 8275 (or other statement) to its return if it distributes property to a partner, and, within 2 years (before or after the distribution), the partner transfers money or other consideration to the partnership. Federal income tax rates 2010   Form 8275 must include the following information. Federal income tax rates 2010 A caption identifying the statement as a disclosure under section 707 of the Internal Revenue Code. Federal income tax rates 2010 A description of the transferred property or money, including its value. Federal income tax rates 2010 A description of any relevant facts in determining if the transfers are properly viewed as a disguised sale. Federal income tax rates 2010 See section 1. Federal income tax rates 2010 707-3(b)(2) of the regulations for a description of the facts and circumstances considered in determining if the transfers are a disguised sale. Federal income tax rates 2010 Contribution to partnership treated as investment company. Federal income tax rates 2010   Gain is recognized when property is contributed (in exchange for an interest in the partnership) to a partnership that would be treated as an investment company if it were incorporated. Federal income tax rates 2010   A partnership is generally treated as an investment company if over 80% of the value of its assets is held for investment and consists of certain readily marketable items. Federal income tax rates 2010 These items include money, stocks and other equity interests in a corporation, and interests in regulated investment companies and real estate investment trusts. Federal income tax rates 2010 For more information, see section 351(e)(1) of the Internal Revenue Code and the related regulations. Federal income tax rates 2010 Whether a partnership is treated as an investment company under this test is ordinarily determined immediately after the transfer of property. Federal income tax rates 2010   This rule applies to limited partnerships and general partnerships, regardless of whether they are privately formed or publicly syndicated. Federal income tax rates 2010 Contribution to foreign partnership. Federal income tax rates 2010   A domestic partnership that contributed property after August 5, 1997, to a foreign partnership in exchange for a partnership interest may have to file Form 8865 if either of the following apply. Federal income tax rates 2010 Immediately after the contribution, the partnership owned, directly or indirectly, at least a 10% interest in the foreign partnership. Federal income tax rates 2010 The fair market value of the property contributed to the foreign partnership, when added to other contributions of property made to the partnership during the preceding 12-month period, is greater than $100,000. Federal income tax rates 2010   The partnership may also have to file Form 8865, even if no contributions are made during the tax year, if it owns a 10% or more interest in a foreign partnership at any time during the year. Federal income tax rates 2010 See the form instructions for more information. Federal income tax rates 2010 Basis of contributed property. Federal income tax rates 2010   If a partner contributes property to a partnership, the partnership's basis for determining depreciation, depletion, gain, or loss for the property is the same as the partner's adjusted basis for the property when it was contributed, increased by any gain recognized by the partner at the time of contribution. Federal income tax rates 2010 Allocations to account for built-in gain or loss. Federal income tax rates 2010   The fair market value of property at the time it is contributed may be different from the partner's adjusted basis. Federal income tax rates 2010 The partnership must allocate among the partners any income, deduction, gain, or loss on the property in a manner that will account for the difference. Federal income tax rates 2010 This rule also applies to contributions of accounts payable and other accrued but unpaid items of a cash basis partner. Federal income tax rates 2010   The partnership can use different allocation methods for different items of contributed property. Federal income tax rates 2010 A single reasonable method must be consistently applied to each item, and the overall method or combination of methods must be reasonable. Federal income tax rates 2010 See section 1. Federal income tax rates 2010 704-3 of the regulations for allocation methods generally considered reasonable. Federal income tax rates 2010   If the partnership sells contributed property and recognizes gain or loss, built-in gain or loss is allocated to the contributing partner. Federal income tax rates 2010 If contributed property is subject to depreciation or other cost recovery, the allocation of deductions for these items takes into account built-in gain or loss on the property. Federal income tax rates 2010 However, the total depreciation, depletion, gain, or loss allocated to partners cannot be more than the depreciation or depletion allowable to the partnership or the gain or loss realized by the partnership. Federal income tax rates 2010 Example. Federal income tax rates 2010 Areta and Sofia formed an equal partnership. Federal income tax rates 2010 Areta contributed $10,000 in cash to the partnership and Sofia contributed depreciable property with a fair market value of $10,000 and an adjusted basis of $4,000. Federal income tax rates 2010 The partnership's basis for depreciation is limited to the adjusted basis of the property in Sofia's hands, $4,000. Federal income tax rates 2010 In effect, Areta purchased an undivided one-half interest in the depreciable property with her contribution of $10,000. Federal income tax rates 2010 Assuming that the depreciation rate is 10% a year under the General Depreciation System (GDS), she would have been entitled to a depreciation deduction of $500 per year, based on her interest in the partnership, if the adjusted basis of the property equaled its fair market value when contributed. Federal income tax rates 2010 To simplify this example, the depreciation deductions are determined without regard to any first-year depreciation conventions. Federal income tax rates 2010 However, since the partnership is allowed only $400 per year of depreciation (10% of $4,000), no more than $400 can be allocated between the partners. Federal income tax rates 2010 The entire $400 must be allocated to Areta. Federal income tax rates 2010 Distribution of contributed property to another partner. Federal income tax rates 2010   If a partner contributes property to a partnership and the partnership distributes the property to another partner within 7 years of the contribution, the contributing partner must recognize gain or loss on the distribution. Federal income tax rates 2010   The recognized gain or loss is the amount the contributing partner would have recognized if the property had been sold for its fair market value when it was distributed. Federal income tax rates 2010 This amount is the difference between the property's basis and its fair market value at the time of contribution. Federal income tax rates 2010 The character of the gain or loss will be the same as the character of the gain or loss that would have resulted if the partnership had sold the property to the distributee partner. Federal income tax rates 2010 Appropriate adjustments must be made to the adjusted basis of the contributing partner's partnership interest and to the adjusted basis of the property distributed to reflect the recognized gain or loss. Federal income tax rates 2010 Disposition of certain contributed property. Federal income tax rates 2010   The following rules determine the character of the partnership's gain or loss on a disposition of certain types of contributed property. Federal income tax rates 2010 Unrealized receivables. Federal income tax rates 2010 If the property was an unrealized receivable in the hands of the contributing partner, any gain or loss on its disposition by the partnership is ordinary income or loss. Federal income tax rates 2010 Unrealized receivables are defined later under Payments for Unrealized Receivables and Inventory Items. Federal income tax rates 2010 When reading the definition, substitute “partner” for “partnership. Federal income tax rates 2010 ” Inventory items. Federal income tax rates 2010 If the property was an inventory item in the hands of the contributing partner, any gain or loss on its disposition by the partnership within 5 years after the contribution is ordinary income or loss. Federal income tax rates 2010 Inventory items are defined later in Payments for Unrealized Receivables and Inventory Items. Federal income tax rates 2010 Capital loss property. Federal income tax rates 2010 If the property was a capital asset in the contributing partner's hands, any loss on its disposition by the partnership within 5 years after the contribution is a capital loss. Federal income tax rates 2010 The capital loss is limited to the amount by which the partner's adjusted basis for the property exceeded the property's fair market value immediately before the contribution. Federal income tax rates 2010 Substituted basis property. Federal income tax rates 2010 If the disposition of any of the property listed in (1), (2), or (3) is a nonrecognition transaction, these rules apply when the recipient of the property disposes of any substituted basis property (other than certain corporate stock) resulting from the transaction. Federal income tax rates 2010 Contribution of Services A partner can acquire an interest in partnership capital or profits as compensation for services performed or to be performed. Federal income tax rates 2010 Capital interest. Federal income tax rates 2010   A capital interest is an interest that would give the holder a share of the proceeds if the partnership's assets were sold at fair market value and the proceeds were distributed in a complete liquidation of the partnership. Federal income tax rates 2010 This determination generally is made at the time of receipt of the partnership interest. Federal income tax rates 2010 The fair market value of such an interest received by a partner as compensation for services must generally be included in the partner's gross income in the first tax year in which the partner can transfer the interest or the interest is not subject to a substantial risk of forfeiture. Federal income tax rates 2010 The capital interest transferred as compensation for services is subject to the rules for restricted property discussed in Publication 525 under Employee Compensation. Federal income tax rates 2010   The fair market value of an interest in partnership capital transferred to a partner as payment for services to the partnership is a guaranteed payment, discussed earlier. Federal income tax rates 2010 Profits interest. Federal income tax rates 2010   A profits interest is a partnership interest other than a capital interest. Federal income tax rates 2010 If a person receives a profits interest for providing services to, or for the benefit of, a partnership in a partner capacity or in anticipation of being a partner, the receipt of such an interest is not a taxable event for the partner or the partnership. Federal income tax rates 2010 However, this does not apply in the following situations. Federal income tax rates 2010 The profits interest relates to a substantially certain and predictable stream of income from partnership assets, such as income from high-quality debt securities or a high-quality net lease. Federal income tax rates 2010 Within 2 years of receipt, the partner disposes of the profits interest. Federal income tax rates 2010 The profits interest is a limited partnership interest in a publicly traded partnership. Federal income tax rates 2010   A profits interest transferred as compensation for services is not subject to the rules for restricted property that apply to capital interests. Federal income tax rates 2010 Basis of Partner's Interest The basis of a partnership interest is the money plus the adjusted basis of any property the partner contributed. Federal income tax rates 2010 If the partner must recognize gain as a result of the contribution, this gain is included in the basis of his or her interest. Federal income tax rates 2010 Any increase in a partner's individual liabilities because of an assumption of partnership liabilities is considered a contribution of money to the partnership by the partner. Federal income tax rates 2010 Interest acquired by gift, etc. Federal income tax rates 2010   If a partner acquires an interest in a partnership by gift, inheritance, or under any circumstance other than by a contribution of money or property to the partnership, the partner's basis must be determined using the basis rules described in Publication 551. Federal income tax rates 2010 Adjusted Basis There is a worksheet for adjusting the basis of a partner's interest in the partnership in the Partner's Instructions for Schedule K-1 (Form 1065). Federal income tax rates 2010 The basis of an interest in a partnership is increased or decreased by certain items. Federal income tax rates 2010 Increases. Federal income tax rates 2010   A partner's basis is increased by the following items. Federal income tax rates 2010 The partner's additional contributions to the partnership, including an increased share of, or assumption of, partnership liabilities. Federal income tax rates 2010 The partner's distributive share of taxable and nontaxable partnership income. Federal income tax rates 2010 The partner's distributive share of the excess of the deductions for depletion over the basis of the depletable property, unless the property is oil or gas wells whose basis has been allocated to partners. Federal income tax rates 2010 Decreases. Federal income tax rates 2010   The partner's basis is decreased (but never below zero) by the following items. Federal income tax rates 2010 The money (including a decreased share of partnership liabilities or an assumption of the partner's individual liabilities by the partnership) and adjusted basis of property distributed to the partner by the partnership. Federal income tax rates 2010 The partner's distributive share of the partnership losses (including capital losses). Federal income tax rates 2010 The partner's distributive share of nondeductible partnership expenses that are not capital expenditures. Federal income tax rates 2010 This includes the partner's share of any section 179 expenses, even if the partner cannot deduct the entire amount on his or her individual income tax return. Federal income tax rates 2010 The partner's deduction for depletion for any partnership oil and gas wells, up to the proportionate share of the adjusted basis of the wells allocated to the partner. Federal income tax rates 2010 Partner's liabilities assumed by partnership. Federal income tax rates 2010   If contributed property is subject to a debt or if a partner's liabilities are assumed by the partnership, the basis of that partner's interest is reduced (but not below zero) by the liability assumed by the other partners. Federal income tax rates 2010 This partner must reduce his or her basis because the assumption of the liability is treated as a distribution of money to that partner. Federal income tax rates 2010 The other partners' assumption of the liability is treated as a contribution by them of money to the partnership. Federal income tax rates 2010 See Effect of Partnership Liabilities , later. Federal income tax rates 2010 Example 1. Federal income tax rates 2010 Ivan acquired a 20% interest in a partnership by contributing property that had an adjusted basis to him of $8,000 and a $4,000 mortgage. Federal income tax rates 2010 The partnership assumed payment of the mortgage. Federal income tax rates 2010 The basis of Ivan's interest is: Adjusted basis of contributed property $8,000 Minus: Part of mortgage assumed by other partners (80% × $4,000) 3,200 Basis of Ivan's partnership interest $4,800 Example 2. Federal income tax rates 2010 If, in Example 1, the contributed property had a $12,000 mortgage, the basis of Ivan's partnership interest would be zero. Federal income tax rates 2010 The $1,600 difference between the mortgage assumed by the other partners, $9,600 (80% × $12,000), and his basis of $8,000 would be treated as capital gain from the sale or exchange of a partnership interest. Federal income tax rates 2010 However, this gain would not increase the basis of his partnership interest. Federal income tax rates 2010 Book value of partner's interest. Federal income tax rates 2010   The adjusted basis of a partner's interest is determined without considering any amount shown in the partnership books as a capital, equity, or similar account. Federal income tax rates 2010 Example. Federal income tax rates 2010 Enzo contributes to his partnership property that has an adjusted basis of $400 and a fair market value of $1,000. Federal income tax rates 2010 His partner contributes $1,000 cash. Federal income tax rates 2010 While each partner has increased his capital account by $1,000, which will be re