Discussion:Partnership in a S-Corporation
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Discussion Forum Index --> Tax Questions --> Partnership in a S-Corporation
Martha Brown (talk|edits) said: | 22 March 2007 |
| Can a partnership of 2 people be inside a S-Corporation owned by one of the partners? If so, what is the tax reporting; a 1065 and a 1120S? Is the S-corporation considered the parent, if so? I would appreciate some details because I am just guessing here. | |
| 22 March 2007 | |
| Do you mean.. "can an S-corporation be a partner in a partnership?"
yes. or Can a partnership be one of the owners (or the owner) of an S-corp? no. Sec. 1361 I am just guessing too, lacking details myself. | |
Martha Brown (talk|edits) said: | 22 March 2007 |
| The intent is not to have the S-corporation be a partner in a partnership because then the other partner would share in the profits of the S-corporation. Am I correct? | |
| 22 March 2007 | |
| I think you have it backwards Martha...
Partnership can not own stock in S corp (if it does, it is no longer an S corp)...S corp can be a prtner in partnership. In the latter, the other partners in the partnership do not share in the profits of the S corp...only the profits of the partnership. | |
Martha Brown (talk|edits) said: | 22 March 2007 |
| I am getting confused, then. It sounds, then, that there has to be separate books for the partnership. In the case, I am talking about, the books of the "partnership" are kept within the S-corporation. Is it then something like a joint venture, etc. if that is the case? This all sounds wrong. Please advise. | |
| 22 March 2007 | |
| Martha, what activity does the "partnership" engage in?
Check IRC Sec. 7701(a)(2) and Treas. Reg. 301.7701-1. Whether a partnership is formed is a question of fact and depends upon whether the parties intended to, and did in fact, join together in the conduct of an enterprise. There is also plenty of case law addressing the issue. | |
Martha Brown (talk|edits) said: | 22 March 2007 |
| I am in a dilemna, then. I have my own practice and am the controller of this company. I am 95% sure the parties intended to form a partnership; at least that is what the stockholder of the company called it. They did, in fact, join together in the conduct of an enterprise. We were asked to book all the transactions on the books of the s-corporation and that is what we do. I will be preparing the s-corporation's tax return. The other "partner" is a relative. | |
| 23 March 2007 | |
| OK So you have a partnership either between an S Corp or its Sole Shareholder and a relative and all of the partnership activity is recorded on the Corporation's books. I hope the Corp is on extension because you are going to have to put the partnership books together by journal entry. The co-mingling is problematic but you can deal with it. Partnership really should have its own bank account. | |
