Tax Disadvantages Of A Partnership?

Losses can be taken by the partners, but they are more limited than in a sole proprietorship. Certain expenses such as charitable contributions cannot be deducted by the partnership, but are passed through to the partners. Why is this important? Because not deducting an expense at the partnership level raises the amount of partnership profit Read more…

Reasonable Basis – Tax Position

To avoid the substantial understatement penalty by adequate disclosure, you must properly disclose the position on the tax return and there must at least be a reasonable basis for the position. To properly disclose the position, complete and attach IRS Form 8275 to your tax return and disclose all relevant facts. A reasonable basis is Read more…

Substantial Authority – Tax

A position is based on “substantial authority” if it has about a 35% or greater chance of success if challenged *and is adequately supported by various authorities recognized by the IRS. These authorities include the Internal Revenue Code, tax court cases, revenue rulings, technical advice memos, and the like. More on Tax Trouble, Penalties and Read more…

Avoiding The Tax Penalty

There are various ways to avoid the substantial understatement penalty, including (1) establishing that the positions taken on the return were based on “substantial authority”, (2) “adequate disclosure” on the tax return of a position with a reasonable basis of success, or (3) establishing that you acted with reasonable cause and in good faith. Meeting Read more…