Rush Question – is general partnership interest passive income?

  • Creator
    Topic
  • May 28, 2015 at 6:02 pm #194376
    joyflying
    Participant

    Hi,

    I am taking REG tomorrow and now have a rush question – is general partnership interest passive income? I know that limited partnership interest definitely is. But general partners work actively in the partnership. So what about their interest?

    Thanks a bunch!

    AUD - 91
    BEC - 90
    FAR - 93
    REG - 94
    The best is yet to come..

    FAR - 93 (08/24/2014 - First down!)
    AUD - 91 (11/21/2014 - Second down!!)
    BEC - 90 (02/26/2015 - Third down!!!)
    REG - 94 (05/29/2015 - Touch down!!!!!)

    Here comes my touch down!
    Certified in MA (08/2015)

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  • May 28, 2015 at 6:21 pm #667634
    MaLoTu
    Participant

    no. I cannot answer your question with 100% precision, but distributions deduct from the basis and guaranteed payments are pass through income. General partnerships are not passive because the partners have implied managerial rights.

    Someone please let me know if I am wrong. I am testing tomorrow, so still studying as well :-/

    Almost always from my phone... please excuse my typos!

    All 4 passed - 2016

    CA CPA

    May 28, 2015 at 6:45 pm #667635
    joyflying
    Participant

    @MaLo Tu Here is what I think. Guarantee payment is definitely ordinary income. But the “ordinary income” on the K-1 should be non-passive income for general partners. Other items on the k-1 should maintain their characters. But for limited partners, “ordinary income” on the K-1 should be passive income.

    Anyone can correct me or confirm my thought please?

    AUD - 91
    BEC - 90
    FAR - 93
    REG - 94
    The best is yet to come..

    FAR - 93 (08/24/2014 - First down!)
    AUD - 91 (11/21/2014 - Second down!!)
    BEC - 90 (02/26/2015 - Third down!!!)
    REG - 94 (05/29/2015 - Touch down!!!!!)

    Here comes my touch down!
    Certified in MA (08/2015)

    May 28, 2015 at 6:52 pm #667636
    Thrawn
    Participant

    I don't think this will be on the exam, but income from a partnership interest is a passive activity if it meets either of the following.

    •

    Trade or business activities in which you do not materially participate during the year.

    •

    Rental activities, even if you do materially participate in them, unless you are a real estate professional.

    So a participating general partner would have ordinary income, but a passive GP would not.

    BEC 87 Feb 14
    REG 84 Apr 14
    FAR 82 Nov 14
    AUD 86 Feb 15

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