Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 01-20-2015, 01:57 PM
Junior Member
 
Join Date: Jan 2015
Posts: 1
Small business dividends/distributions

My wife and I were married in 2013 and will be filing jointly this year. She is in the process of selling half of her restaurant to her business partner. She is still technically a co-owner/operator and has been receiving monthly dividend (distribution?) checks for the buyout, until she receives their agreed-upon price, but she doesn't receive any other hourly pay or salary. She now works a different job in another state.

How would we report this buyout money? She isn't sure either. They always had their "tax guy" handle that side of things but we don't live near him anymore, and I'm not even sure if he advised them on this buyout strategy.... It was her business so I didn't want to get too involved, but now I'm a little nervous for this upcoming tax season since she couldn't answer my questions.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 01-20-2015, 11:25 PM
Moderator
 
Join Date: Oct 2010
Posts: 5,227
Quote:
Originally Posted by lmayo1 View Post
She is still technically a co-owner/operator and has been receiving monthly dividend (distribution?) checks for the buyout, until she receives their agreed-upon price, but she doesn't receive any other hourly pay or salary. She now works a different job in another state.
.
A partnership’s income, losses, deductions, and credit are passed through to the partners for Federal tax purposes and taxed directly to them, regardless of when income is distributed. A partnership distribution is not taken into account in determining the partner's distributive share of partnership income or loss. 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. in general, buyouts are included as an item of gross income and are considered as fully taxable income under IRS tax laws. The tax treatment of the partnership buyout depends on the composition of the partnership’s assets at the point of dissociation. If the partnership’s assets at the time of dissociation include receivables or inventory, some of the partners’ proceeds will be treated as ordinary income. Unrealized receivables include any right to payment the partnership has for goods already delivered or services already provided. The proceeds from the sale that correspond to the partnership’s receivables or inventory are treated as ordinary income. For example, if a partnership had $100k in assets at the time of dissociation and $10k of those assets were inventory, 10 percent of the dissociated partner’s proceeds is ordinary income. After deducting the receivables and inventory amount from the proceeds, the capital gain or loss is calculated by subtracting the partner’s basis from the remainder.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
IRS Encourages Small Employers to Check Out Small Business Health Care Tax Credit Samatg For 2011 0 03-13-2012 06:53 PM
Small Business Questions jettasmom1974 S-Corporation 1 03-10-2012 06:39 PM
New Small Business Help jettasmom1974 S-Corporation 0 03-09-2012 01:19 AM
As part of the "Small Business Jobs Act of 2010 Tax Provisions, IRS allows Temporary exclusion of 100% of gain on certain small business stock. TaxGuru General 0 01-31-2011 06:14 PM
Started out a small business Please help! seek4help Sole-Proprietorship 6 03-13-2009 12:10 AM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning