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Discussion:P-ship management fee = 2% deduction?

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Discussion Forum Index --> Basic Tax Questions --> P-ship management fee = 2% deduction?

Discussion Forum Index --> Tax Questions --> P-ship management fee = 2% deduction?

Yt1300inHtown (talk|edits) said:

28 March 2009
Hi all, hope the returns are treating you well.

Have a partnership here that has ONLY an investment account full of stocks and cash. No other activity or assets.

We have been deducting the broker's advisory fee on Sck K as a 2% deduction. Fine. However, the partnership is also charged a "management fee" for which we have taken as a deduction NOT subject to 2%. My preparer, who is pretty reliable, says she heard this in a seminar recently.

Given that the partnership does nothing but let a broker manage it's investments, it seems like taking a deduction for management fees for running the partnership is...improper? If all the partnership does is generate investment income, wouldn't the nature of the management fee be likewise investment expense? Or am I trying too hard???

I can't find anything solid on this.


RoyDaleOne (talk|edits) said:

28 March 2009

IRS Revenue Rulings 2008-39, 2008-31 I.R.B. 252

Rev. Rul. 2008-39

I believe you correct.

Yt1300inHtown (talk|edits) said:

28 March 2009
Thanks. Ummm..correct on which part?

As I read this, it seems under 212 the management fee is not an ordinary and necessary expense and therefore must be seperately stated to the partners and treated by them as though directly incurred which puts them at the 2% category?

I have been looking at this way too long.

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