Publication 541 |
2000 Tax Year |
Introduction
This publication explains how the income tax law applies to
partnerships and to partners. Generally, 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.
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 information on the rules for designating a
TMP, see the instructions for Schedule B of Form 1065 and section
301.6231(a)(7)-1 of the regulations.
Many rules in this publication do not apply to partnerships that
file Form 1065-B, Electing Large Partnerships. For
the rules that apply to these partnerships, see the instructions for
Form 1065-B. However, the partners of electing large
partnerships can use the rules in this publication except as otherwise
noted.
Withholding on foreign partner or firm.
If a partnership acquires a U.S. real property interest from a
foreign person or firm, the partnership may have to withhold tax on
the amount it pays for the property (including cash, the fair market
value of other property, and any assumed liability). If a partnership
has income effectively connected with a trade or business in the
United States, it must withhold on the income allocable to
its foreign partners. A partnership may have to withhold tax on a
foreign partner's distributive share of fixed or determinable income
not effectively connected with a U.S. trade or business. A partnership
that fails to withhold may be held liable for the tax, applicable
penalties, and interest. For more information, see Publication 515,
Withholding of Tax on Nonresident Aliens and Foreign
Corporations.
Comments and suggestions.
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suggestions for future editions.
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Internal Revenue Service
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