A quick run down of some items that businesses should review prior to the year's end with some appropriate year end info to guide choice making. As well as some items to think about for the upcoming year.
Name Only Partnership? You May Have a Problem…
For my nerds, today’s topic is Nwabasili Tax Court Memo 2016-220.
Do you have a business with someone and don’t file a partnership tax return? Perhaps you and your friend have a graphic business together, perhaps you bought a rental home together. Well, in the Nwabasili case, the taxpayer reported his part of his income and expenses on a Schedule C (tax form titled Profit or Loss from Business – for a sole proprietor). The Tax Court determined that the brothers intended for the business to be a partnership. It then disallowed the taxpayer’s write-offs for certain costs with the ventures stated that ‘they are partnership deductions that must be taken on Form 1065’.
Many of you know that I insist that all partnership agreements be in writing. I explain that a partnership is like a marriage without the love. It’s about the money. Put it in writing when you are in the ‘honeymoon’ state. File a LLC with the state (seek an attorney) and then file properly either as a partnership or S Corporation. Do not leave yourself open for an audit.
Remember, you don’t mess with the IRS.
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