Gary Goodman wrote:
- quote -

My guess is that he's referring to dividends on preferred
stock, which if subtracted from total net income should be
allocated separately to partners. But other dividend
income is also. so...... I dunno.

ChEAr$,
Harlan Lunsford

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"david banford" <dban1957[at]aol.com> wrote:

- quote -

A preferred return is a form of special allocation. The K-1
instructions state that specially allocated "ordinary gain
and loss" is to be shown on line 7 of the K-1. While
techinically the preferred return would be a share of
income, and not gain, I generally put the special allocation
there. It makes it easier for the tax return software to
handle the allocations if the preferred return is allocated
to line 7.

One other possibility. A preferred return that is
effectively a guaranteed return should probably be treated
as a guaranteed payment for capital. This would make it a
deduction at the partnership level, and the special
allocation of the income would appear on the guaranteed
payment line of the K-1.

(A payment that is strictly a function of partnership net
income would not be a guaranteed payment. - example: an
agreement to pay the first $25,000 of partnership net income
to partner A is not a guaranteed payment. An amount is not
a §707(c) payment unless it is payable regardless of
partnership net income.)

Brian Bivona

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eagent[at]alliancetax.com says...
- quote -

I'm not certain but I think the OP's question revolves
around using a different percentage for allocation of income
than the percentage of ownership.

Gary

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"david banford" <dban1957[at]aol.com> wrote:

- quote -

I am not familiar with the term "Preferred Returns and
Allocations" can you tell us where you got that phrase?

Gene E. Utterback, EA

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My questions centers around preferred returns and
allocations. My understanding is that a preferred return is
a profit allocation and you reduce the ordinary income that
is pass through by the preferred return and then allocate
the remainder based on there profit %.

I guess my question is does the preferred return show up on
the partners K-1 as other income and does the preferred
return reduce the the other ordinary income that get pass
through such us dividends and interest.

If anyone has any examples or a spreadsheet on how they
handle this I would greatly appreciate it. I am trying to
learn more about this topic.

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