Partnership Tax Year and Limited Liability Partnership (Essay Sample)

Discussion Questions
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Discussion Questions
Response to question 1
The selected fiscal tax year is the year ending September 30. In keeping with the conditions of the Section 444 election, the partnership will have to make required payment on Form 720 representing the amount of tax deferred by using the September 30 tax year. The required payment is calculated under the Section 7519 rules and is taxed a rate equivalent to the highest individual tax rate in addition to 1% multiplied by the deferred amount of income. It is worth mentioning that this tax is phased-in over a period of 4 years. If the partnership has a deferral of not more than $500, it is exempted from this payment. As soon as the election is made, it would remain in effect until the time when it is terminated.
Response to question 2
Limited liability partnerships (LLP) form of business under state laws are partnerships that provide professional services and have registered as a limited liability partnership under the laws of the state. An LLP essentially limits the personal liability of a partner for liabilities, obligations, and debts of the partnership, be it in contract, tort, or from wrongful acts, negligence, omissions or errors, except that a partner cannot remove liability for her own negligence. For tax purposes, a limited liability partnership which is treated as a partnership for the purposes of federal income tax would be treated as a partnership for state tax purposes. Similarly, a li...