Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

Are partners guaranteed payments deductible for texas franchise

tax?...
Are partners guaranteed payments deductible for texas franchise tax?
Ask Your Own Tax Question
Answered in 1 hour by:
9/17/2013
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,132
Experience: Taxes, Immigration, Labor Relations
Verified

Lev :

Hi and welcome to Just Answer!


Unless a taxable entity qualifies and elects to file using the E-Z Computation, the revised tax base for the Texas franchise tax is the taxable entity's margin. Margin equals the lowest of three calculations:
--total revenue minus cost of goods sold;
--total revenue minus compensation; or
--total revenue times 70 percent.



A partnership must include the net distributive income to natural persons in the wages and cash compensation component of compensation.

Net distributive income for a pass-through entity is the net amount of income, gain, deduction, or loss reportable to the owners on an IRS Form K-1 for the tax year of the entity. Guaranteed payments to partners are included when computing net distributive income.To compute Net Distributive Income for a partnership:
From IRS Form 1065 K-1, add items 1, 2, 3, 4, 5, 6a, 7, 8, 9a, 10, and 11. Subtract from that result the sum of items 12, 13, and 16, Code L (Foreign taxes) and any depletion that the partnership included in its margin calculation.
See for reference
http://www.window.state.tx.us/taxinfo/franchise/faq_tax_ent.html
http://www.window.state.tx.us/taxinfo/franchise/faq_rpt_pay.html
http://www.window.state.tx.us/taxinfo/franchise/faq_comp.html

Lev :

So far - if the margin equals the total revenue minus compensation (lowest of three calculations) - then - because the compensation includes guaranteed payments - such payments are deductible for TX franchise tax.
Otherwise - if the margin equals to other of three calculations - guaranteed payments do not affect TX franchise tax.

Customer: Ok. So if revenue is $1.5K and guaranteed
Customer: payments are $500K ( that's 1.5 mil before)
Customer: $1.5mil revenue with guaranteed pmts of $500K . Are the GP deductible?
Lev :

Technically - there is no direct deduction for guaranteed payments.
However - when the margin which is used to calculate TX franchise tax.equals to equals the lowest of three calculations.
One of these calculations is total revenue minus compensation,
Because guaranteed payments are included into compensation - they are deducted for that ONE calculation only.
In additional - such deduction is limited by $330,000 per person in 2012 and 2013. So if for instance guaranteed payments of $500K paid to two partners as $100k and $400k - only $430k is deductible.
So - yes - guaranteed payments are deductible in general - but if that deduction will affect calculations of TX franchise tax in your specific situation depends on many circumstances.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,132
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,132
30,132 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
Tax Question: Non-Resident Withholding Tax, Franchise Tax
Tax Question: Non-Resident Withholding Tax, Franchise Tax Board, CA HISTORY: 1. The property is in California 2. The owner resides in outside of California 3. Metro Property Management collects monthl… read more
abci168
abci168
Principal
27 satisfied customers
Dose mean can not deduct state income taxes only or dose it
dose mean can not deduct state income taxes only or dose it includes property taxes too … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Form 1120, cash basis. If Taxes paid to IRS are deductible,
Form 1120, cash basis. If Taxes paid to IRS are deductible, are refunds for overpayment the equivalent of income?… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
723 satisfied customers
What is a franchise tax. What is franchise tax and it taxed
Is there anything else the Accountant should be aware of?Customer: the home sold was inherented… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
723 satisfied customers
The CA franchise tax board call yesterday stating that I
The CA franchise tax board call yesterday stating that I didn't file my 2001 540 returns. I have been on a garnish plan with them since about 2014. I can't find that years forms. What can I do? … read more
abci168
abci168
Principal
27 satisfied customers
Sure. I'm electing to deduct foreign taxes paid in 2016 due
I'm electing to deduct foreign taxes paid in 2016 due to limitations on the credit usage. I have a credit carryover from 2015 as well. Since the carryover is from earlier years, can I use some of the carryover and the current year foreign tax deduction on the same 2016 tax return? … read more
Anne
Anne
Master Tax Preparer
1,328 satisfied customers
Investment Expense Deduction: I took a loan (through my
Investment Expense Deduction: I took a loan (through my company) to buy a stake in my company's passive activity business (a partnership which generates a K-1). As part of this process, I paid a $2,00… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
You may recall that tax deductions are only deductible by
You may recall that tax deductions are only deductible by the legislative grace of Congress. After this lesson, you might have realized that Congress was pretty generous with the types of business exp… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,458 satisfied customers
I (US person) own 50% in a foreign partnership (real estate
I (US person) own 50% in a foreign partnership (real estate partnership under civil law (GbR) in Germany), the other 50% are held by a none US person. - I have rental income from the foreign partnersh… read more
taxmanrog
taxmanrog
Master\u0027s Degree
697 satisfied customers
Client (US resident) with foreign salary and taxes paid in
Client (US resident) with foreign salary and taxes paid in foreign currency - Part II of 1116 form for some reason adds taxes paid only in US $ (line "o" through "r") - it does not take taxes paid in … read more
Lev
Lev
Tax Advisor
30,132 satisfied customers
Can house maintenance and property taxes be deducted on form
Hello. Can house maintenance and property taxes be deducted on form 1041 for a house owned by decedent prior to the Executors selling it? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I'm trying to figure out how a partnership "deducts"
I'm trying to figure out how a partnership "deducts" contributions to a partner's retirement plan … read more
Lev
Lev
Tax Advisor
30,132 satisfied customers
I sent my out of state California excise franchise tax work
I sent my out of state California excise franchise tax work in but it never arrived … read more
James Daloisio
James Daloisio
Attorney
Doctoral Degree
56 satisfied customers
On a Partnership K-1, foreign income items are reported on
On a Partnership K-1, foreign income items are reported on Line 16, but in addition there is a separate schedule listing foreign currency gain, Subpart F income and qualified fund income under Sec 129… read more
abci168
abci168
Principal
27 satisfied customers
I would like clarification on the IRS tax deductions and a
I would like clarification on the IRS tax deductions and a rental property I purchased recently. … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
We had passed through income of $2000000 on a government
We had passed through income of $2000000 on a government form in 2007. That pass-through income would have continued through 2012 the year that we divorced in one form or another. My accountant is a d… read more
Matthew Breecher
Matthew Breecher
President
MBA (Graduate Legal Studies)
285 satisfied customers
Deductible unreimbursed partnership expenses are deductible
Deductible unreimbursed partnership expenses are deductible on Line 28 of Schedule E. In this case the expense is a tractor with a cost of $ 25,000.00. This is a depreciable asset and would not normal… read more
Matthew Breecher
Matthew Breecher
President
MBA (Graduate Legal Studies)
285 satisfied customers
A HUSBAND AND WIFE LLC PARTNERSHIP, BEING A PASS THROUGH
A HUSBAND AND WIFE LLC PARTNERSHIP, BEING A PASS THROUGH ENTITY IS OWNED BY THE PARTNERS AND IS NOT A SEPERATE ENTITY. … read more
Brian Michels
Brian Michels
Partner, CPA
Bachelors of Business Administration
154 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x