Accounting transaction for liquidating partnership
However, if the partnership accounts for insurance paid for a partner as a reduction in distributions to the partner, the partnership cannot deduct the premiums.For 2001, a partner who qualifies can deduct 60% of the health insurance premiums paid by the partnership on his or her behalf as an adjustment to income.
Payments by accrual basis partnership to cash basis partner.
A partnership that uses an accrual method of accounting cannot deduct any business expense owed to a cash basis partner until the amount is paid.
(See Organization expenses and syndication fees under Partnership Income or Loss, earlier).
However, these payments must be included in the partners' individual income tax returns. If a partner is to receive a minimum payment from the partnership, the guaranteed payment is the amount by which the minimum payment is more than the partner's distributive share of the partnership income before taking into account the guaranteed payment. Under a partnership agreement, Sandy is to receive 30% of the partnership income, but not less than $8,000. Sandy's share, without regard to the minimum guarantee, is $6,000 (30% × $20,000).
A's husband, AH, is the sole beneficiary of Trust T.