jmail7[at]andrewmitchel.com wrote:
- quote -

Thanks. It's certainly not a model of clarity, though I get the idea
that if it's purely a passive investment (or not a money-making kind of
investment), then a partnership is not required. It sounds clear, but
it seems like it would be a very fuzzy line to draw in many cases.

Stu

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On Jan 23, 3:27*pm, Stuart Bronstein <spamt...[at]lexregia.com> wrote:
- quote -

See Treas. Reg. § 301.7701-1(a)(2) for the "joint undertaking"
language.

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Gil Faver wrote:
- quote -


http://www.taxalmanac.org/index.php/...C_Sec._1.761-2

or

http://tinyurl.com/2b6zrj

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Stuart Bronstein wrote:
- quote -

541 adequately reflects the regulation. One part of the regs that
is not in the Pub, is a section on making the election that does
not require filing the formal election with the filing of the
first partnership return.

(ii) If an unincorporated organization described in
subparagraphs (1) and either (2) or (3) of paragraph (a) of this
section does not make the election provided in section 761(a) in
the manner prescribed by subdivision (i) of this subparagraph, it
shall nevertheless be deemed to have made the election if it can
be shown from all the surrounding facts and circumstances that it
was the intention of the members of such organization at the time
of its formation to secure exclusion from all of subchapter K
beginning with the first taxable year of the organization.
Although the following facts are not exclusive, either one of
such facts may indicate the requisite intent:

(a) At the time of the formation of the organization there is an
agreement among the members that the organization be excluded
from subchapter K beginning with the first taxable year of the
organization, or

(b) The members of the organization owning substantially all of
the capital interests report their respective shares of the items
of income, deductions, and credits of the organization on their
respective returns (making such elections as to individual items
as may be appropriate) in a manner consistent with the exclusion
of the organization from subchapter K beginning with the first
taxable year of the organization.

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Gil Faver wrote:
- quote -

Here's Publication 541: http://www.irs.gov/pub/irs-pdf/p541.pdf

For organizations formed after 1996, it basically says all
combinations of two or more people are taxed as partnerships unless
they are taxed as a different kind of legal entity. It does say,
though, that

"a joint undertaking merely to share expenses is not a partnership.
For example co-ownership of property maintained and rented or leased
is not a partnership unless the co-owners provide services to the
tenants." It has to be pretty much a completely passive investment.

I didn't see anything in the regulations to support that statement,
though I didn't do an exhaustive look. Remember, courts have
generally said you may not be allowed to rely even on something in
writing from the IRS in describing what the law is.

If that's what OP's investment group is, and if they are not
considered a partnership, then they are apparently required to share
their tax write-offs pro rata each year, and not as OP described as
is being done now.

Stu

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"D. Stussy" <spam[at]bde-arc.ampr.org> wrote in message
news:fn6rvf$v4t$1[at]snarked.org...
- quote -


well, that is not what their Pub. 541 says (thanks, Alan), for certain
situations.

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D. Stussy wrote:
- quote -

Regulation 301.7701-2 says,

"A business entity with two or more members is classified for federal
tax purposes as either a corporation or a partnership."

A quick review of the rules does not indicate any exceptions for
passive investments or anything else other than other defined business
entities.

Stu

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Gil Faver wrote:

- quote -

Section 761(a) says,

"For purposes of this subtitle, the term “partnership” includes a
syndicate, group, pool, joint venture, or other unincorporated
organization through or by means of which any business, financial
operation, or venture is carried on, and which is not, within the
meaning of this title, a corporation or a trust or estate. Under
regulations the Secretary may, at the election of all the members of
an unincorporated organization, exclude such organization from the
application of all or part of this subchapter, if it is availed of—

(1) for investment purposes only and not for the active conduct of a
business,

(2) for the joint production, extraction, or use of property, but not
for the purpose of selling services or property produced or
extracted, or

(3) by dealers in securities for a short period for the purpose of
underwriting, selling, or distributing a particular issue of
securities,

if the income of the members of the organization may be adequately
determined without the computation of partnership taxable income."

The default is that more than one person is a partnership. The IRS
can change that by regulations.

Stu

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Gil Faver" <rowdy'sboss[at]xxyz.com> wrote in message
news:wyxlj.158306$MJ6.30959[at]bgtnsc05-news.ops.worldnet.att.net...
- quote -

....And the IRS has been going after such groups for failure to file a 1065.
There are no "proper IRS requirements" for splitting this across returns.
Two decades ago, the IRS would look the other way after auditing all members
of the group and seeing that it was split properly, but about 5 years ago,
the IRS cracked down. The only remaining exception is for a husband-wife
partnership where the couple files jointly - where a Schedule C (or F) is
permitted in lieu of the 1065.

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Gil Faver wrote:
- quote -


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"Stuart Bronstein" <spamtrap[at]lexregia.com> wrote in message
news:Xns9A2DAD71EEFE1avocatstuyahoofr[at]130.133.1.4...
- quote -

now that I think about it, I think that if there is NOT a written
partnership agreement and no restriction on an individual selling, each
owner may use a Schedule E and the partnership return avoided (of course
they are still a partnership under non-tax law). This has worked in some
family situations I have seen, but don't know I would recommend it among non
family or families that are not truly on the same wavelength.

I don't know where my research on this point is - I last needed it ten years
ago.

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"D. Stussy" <spam[at]bde-arc.ampr.org> wrote in message
news:fn634n$fn7$1[at]snarked.org...
- quote -

not so. It is, of course, a legal partnership. But each can file using
schedule E if they meet the proper IRS requirements. Perhaps an expert
should be hired.

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"Gil Faver" <rowdy'sboss[at]xxyz.com> wrote in message
news:Hyvlj.158039$MJ6.131696[at]bgtnsc05-news.ops.worldnet.att.net...
- quote -

No - not on their individual returns. They will use a 1065 Schedule K-1.

- quote -

Type of ownership is not relevant. It's still a partnership.

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Gil Faver wrote:
- quote -

It's a partnership unless they establish that they aren't required to
file as one. And the partnership agreement will determine how the
income and deductions are allocated, assuming the agreement has
"economic substance." I've never heard of this kind of arrangement,
but it could well be valid.

Stu

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"D. Stussy" <spam[at]bde-arc.ampr.org> wrote in message
news:fn5udh$dg9$1[at]snarked.org...
- quote -

Wouldn't they most likely use schedule E? And, I believe if they are all
liable to pay the mortgage and all in fact pay it, they can all take their
appropriate expense item.

Actually, we would need more information on how the investment property is
held, the loan structured, etc.

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"benn" <benn686[at]hotmail.com> wrote in message
news:d928663f-7d10-4521-ab1f-1d63cc917e17[at]i12g2000prf.googlegroups.com...
- quote -

See form 1065. They have a partnership.

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If an investment property is purchased by a group of people, and they
are dividing the monthly mortgage payements equally, how does the
interest tax benefits work?

Can they each take an equal fraction of the deductions, or does the
law not allow this sort of thing? I have a friend who only gets the
tax deductions once every 5 years (when it rolls around to him) but he
would rather have a smaller deduction every year. Is this common?

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