Tax Memorandum (Partnership Income)

Memorandum

DATE: February 4, 2011
TO: Callaway Real Estate Limited Partnership
FROM: Chia Blais
RE: 2010 taxable Income

FACTS:

Callaway was formed in January 1st 2010 with the purpose of purchasing, constructing, and managing residential solid estate. On February 2, 2010, Callaway purchased an apartment complex for $5,000,000 with a recourse owe of $4,500,000. The allocation for depreciation on the building is $4,000,000 allowing $145,455 annually.
tambour properties is a 5% corporate general checkmate, the compact agreement provides that they (Tambour) testament manage and supply all the work essential to the exertion of the fusions real estate. Tambour will receive an annual concern fee equal to 5% of the gross rental income make by the partnership.
Dr. Samantha Ashin is a hold in partner that contributed land with a basis of $125,000 and a fair market value of $275,000 for a 38% interest in the partnership. The partnership agreement states that limited partners cannot be called upon to make additional capital contributions in the future. The partnership agreement also contains a qualified income offset to run into the alternate test for economic effect.

ISSUES:

1.



Is Tambour Properties acting in capacity as a partner or non partner and is the payment to Tambour Properties for management services considered distributive shares of the partnership or guaranteed payments.

2. What is the taxable operating loss and allocation to Callaway LP and Tambour Properties.

3. What is the taxable operating loss and allocation to Dr. Ashin that is allowable afterward limitation of loss rules are recognized.

CONCLUSIONS:
1. Tambour Properties is performing on going services that are integral to the business and acting in capacity as a partner. The payments received by Tambour are guaranteed payments under section 707(c). The compensation for services is payable without regard to the partnership income.

2. The...If you want to get a full essay, order it on our website: Orderessay



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