Apportionment of partnership profits and losses

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I'm currently preparing a 2016/17 partnership tax return for a farm partnership.  One of the partners died during the course of the 2016/17 tax year and a set of accounts was prepared for the 4 month period to date of death to assist the solicitors dealing with their estate.  These accounts showed a loss for the short period.  The partnership return however, is based on accounts for a longer 16 month period ended in the 2016/17 year and these accounts show a profit.

Is the deceased partner assessed on the loss arising in the period to date of death or should she be assessed on a time apportioned basis on the profit for the whole period used to prepare the partnership tax return?    

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By johngroganjga
08th Jan 2018 16:48

You follow the accounts. That is all. If the deceased partner was debited with his share of the 4 month loss, that is what you follow for tax. If he was credited with a pro rata share of the profit for the year, that too is what you follow for tax. So what do the accounts say about how the results were shared?

You do have the problem that there is a rule that one partner can’t be allocated a loss for tax purposes unless the partnership as a whole has a loss, but that is a different matter to deal with at stage 2. Stage 1 is to allocate the figures on first principles.

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RLI
By lionofludesch
08th Jan 2018 16:40

John has it right.

Your problem is that everyone has to have a profit or everyone has to have a loss (zero counts as either).

The partners are going to have to come to some compromise arrangement.

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Replying to lionofludesch:
By johngroganjga
08th Jan 2018 16:49

Quote:

The partners are going to have to come to some compromise arrangement.

They must already have done so, as the accounts seem to have been completed.

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Replying to johngroganjga:
RLI
By lionofludesch
08th Jan 2018 16:58

Quote:

Quote:

The partners are going to have to come to some compromise arrangement.

They must already have done so, as the accounts seem to have been completed.

Not necessarily so, John.

They seem to have come to an agreement for accounts purposes whereby the deceased partner has a loss. They'll need to come to a second agreement for the tax return.

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Replying to lionofludesch:
By johngroganjga
08th Jan 2018 17:17

We don’t know whether the deceased partner has a loss in the accounts because the OP hasn’t told us. If he has, the adjustment to the tax allocation is a matter of mechanics not negotiation.

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