Form 541 - Partnerships - Department Of Treasury Internal Revenue Service - 2006

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Publication 541
Contents
(Rev. February 2006)
Cat. No. 15071D
Important Reminder . . . . . . . . . . . . . . . 1
Department
of the
Introduction . . . . . . . . . . . . . . . . . . . . . 1
Partnerships
Treasury
Forming a Partnership . . . . . . . . . . . . . 2
Internal
Revenue
Terminating a Partnership . . . . . . . . . . . 3
Service
Exclusion From Partnership
Attention: This publication will no longer be revised on an annual
Rules . . . . . . . . . . . . . . . . . . . . . . 3
basis. The information contained in this publication no longer requires
Partnership Return (Form 1065) . . . . . . . 4
annual updates. To find changes that may affect current year returns,
see What’s New in your income tax return instructions; Publication
Partnership Distributions . . . . . . . . . . . 4
553; What’s Hot in Tax Forms, Pubs, and Other Tax Products at
The information removed from this publication
Transactions Between
is available in the Instructions for Form 1065 and Partner’s Instructions
Partnership and Partners . . . . . . . . 6
for Schedule K-1 (Form 1065). To comment on this revision process,
see Comments and Suggestions on page 2.
Basis of Partner’s Interest . . . . . . . . . . . 9
Disposition of Partner’s Interest . . . . . . 10
How To Get Tax Help . . . . . . . . . . . . . . 12
Index . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Important Reminder
Photographs of missing children. The Inter-
nal Revenue Service is a proud partner with the
National Center for Missing and Exploited Chil-
dren. Photographs of missing children selected
by the Center may appear in this publication on
pages that would otherwise be blank. You can
help bring these children home by looking at the
photographs and calling 1-800-THE-LOST
(1-800-843-5678) if you recognize a child.
Introduction
This publication provides supplemental federal
income tax information for partnerships and
partners. It supplements the information pro-
vided in the instructions for Form 1065, U. S.
Return of Partnership Income, and the Partner’s
Instructions for Schedule K-1 (Form 1065). Gen-
erally, a partnership does not pay tax on its
income but “passes through” any profits or
losses to its partners. Partners must include
partnership items on their tax returns.
For a discussion of business expenses a
partnership can deduct, see Publication 535,
Business Expenses. Members of oil and gas
partnerships should read about the deduction
for depletion in chapter 10 of that publication.
Certain partnerships must have a tax matters
partner (TMP) who is also a general partner. For
Get forms and other information
information on the rules for designating a TMP,
faster and easier by:
see Designation of Tax Matters Partner (TMP) in
the Form 1065 instructions and section
Internet •
301.6231(a)(7)-1 of the regulations.
Many rules in this publication do not
!
apply to partnerships that file Form
1065-B, U.S. Return of Income for
CAUTION
Electing Large Partnerships. For the rules that
apply to these partnerships, see the instructions
for Form 1065-B. However, the partners of elect-
/efile
ing large partnerships can use the rules in this
publication except as otherwise noted.

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