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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
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Experience:  Extensive Experience with Tax, Financial & Estate Issues
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Another partner of ours asked me to check on the tax liability

Customer Question

Another partner of ours asked me to check on the tax liability of the partnership when the funds are transferred from the currency dealer before we issue a check to the Gold/Silver dealer. He seems to think the partnership will owe taxes on the money as soon as it hits the partnership account because it won't be issued to a member with a K-1 Tax form but in the form of a check to a business. Thanks, Glenn
Submitted: 3 years ago.
Category: Tax
Expert:  Stephen G. replied 3 years ago.

Stephen E. Grizey :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand

Stephen E. Grizey :

Not sure of the complete context of your question, but partnerships don't pay taxes; if any income is generated by the partnership, the income is passed on to the partners and the partners pay taxes on it...............

Customer : We plan to issue checks to the members with a K-1 tax form. The partnership will receive Revenue when we cash in our foreign currency. I'm assuming any funds not distributed withi
Customer : Within the allotted tax year, the partnership would owe tax. We want to offer an exchange for gold and silver for partners wanting to hold the investment longer than a year and thus make it a long term gain. If the currency dealer reports the exchange and transfer of money I also thought we would owe tax at that time. I asked two questions yesterday that would explain what I've already been told. Thanks
Stephen E. Grizey :

In a partnership (if that's how you are organized), income distributions don't trigger tax liability for the partners. Income generated by the partnership is taxed to the partners via the K-1s whether the income is distributed or not; the partnership doesn't pay income taxes itself; it is merely a "pass-through" entity; a sale or Exchange may be taxable when the exchange is made, so you'll need to be aware of how that rule applies to your specific circumstances...........Please remember to hit the accept button & thanks for using our service.

Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4011
Experience: Extensive Experience with Tax, Financial & Estate Issues
Stephen G. and other Tax Specialists are ready to help you
Customer: replied 3 years ago.

Steve,

 

Sorry to belabor this request but some more information has come to light. My currency dealer has offered to exchange our invested currency for gold or silver rather than a cash transfer. I understand that if I were to take the cash in the partnership and purchase gold or silver, the partners would owe tax on the first deposit. However, if we were to re-invest in foreign currency we could delay the tax liability until we liquidated the new invested currency. Is that correct? Secondly, if the currency dealer stored gold or silver for us would it still be considered part of the original investment?

 

Thanks,

 

Glenn Morrison

XXX-XXX-XXXX

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