§703 — Partnership computations
52 citing cases
Statute Text — 26 U.S.C. §703
The taxable income of a partnership shall be computed in the same manner as in the case of an individual except that—
the items described in section 702(a) shall be separately stated, and
the following deductions shall not be allowed to the partnership:
the deductions for personal exemptions provided in section 151,
the deduction for taxes provided in section 164(a) with respect to taxes, described in section 901, paid or accrued to foreign countries and to possessions of the United States,
the deduction for charitable contributions provided in section 170,
the net operating loss deduction provided in section 172,
the additional itemized deductions for individuals provided in part VII of subchapter B (sec. 211 and following), and
the deduction for depletion under section 611 with respect to oil and gas wells.
Any election affecting the computation of taxable income derived from a partnership shall be made by the partnership, except that any election under—
subsection (b)(5) or (c)(3) of section 108 (relating to income from discharge of indebtedness),
section 617 (relating to deduction and recapture of certain mining exploration expenditures), or
section 901 (relating to taxes of foreign countries and possessions of the United States),
shall be made by each partner separately.
Treasury Regulations
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Treas. Reg. §1.703-1Partnership computations
(a) Income and deductions. (1) The taxable income of a partnership shall be computed in the same manner as the taxable income of an individual, except as otherwise provided in this section. A partnership is required to state separately in its return the items described in section 702(a)(1) through (7) and, in addition, to attach to its return a statement setting forth separately those items described in section 702(a)(8) which the partner is required to take into account separately in determining his income tax. See paragraph (a)(8) of § 1.702-1. The partnership is further required to compute and to state separately in its return:
(i) As taxable income under section 702(a)(9), the total of all other items of gross income (not separately stated) over the total of all other allowable deductions (not separately stated), or
(ii) As loss under section 702(a)(9), the total of all other allowable deductions (not separately stated) over the total of all other items of gross income (not separately stated).
The taxable income or loss so computed shall be accounted for by the partners in accordance with their partnership agreement.
(2) The partnership is not allowed the following deductions:
(i) The standard deduction provided in section 141.
(ii) The deduction for personal exemptions provided in section 151.
(iii) The deduction provided in section 164(a) for taxes, described in section 901, paid or accrued to foreign countries or possessions of the United States. Each partner's distributive share of such taxes shall be accounted for separately by him as provided in section 702(a)(6).
(iv) The deduction for charitable contributions provided in section 170. Each partner is considered as having paid within his taxable year his distributive share of any contribution or gift, payment of which was actually made by the partnership within its taxable year ending within or with the partner's taxable year. This item shall be accounted for separately by the partners as provided in section 702(a)(4). See also paragraph (b) of § 1.702-1.
(v) The net operating loss deduction provided in section 172. See § 1.702-2.
(vi) The additional itemized deductions for individuals provided in part VII, subchapter B, chapter 1 of the Code, as follows: Expenses for production of income (section 212); medical, dental, etc., expenses (section 213); expenses for care of certain dependents (section 214); alimony, etc., payments (section 215); and amounts representing taxes and interest paid to cooperative housing corporation (section 216). However, see paragraph (a)(8) of § 1.702-1.
(vii) The deduction for depletion under section 611 with respect to domestic oil or gas which is produced after December 31, 1974, and to which gross income from the property is attributable after such year.
(viii) The deduction for capital gains provided by section 1202 and the deduction for capital loss carryover provided by section 1212.
(b) Elections of the partnership—(1) General rule. Any elections (other than those described in subparagraph (2) of this paragraph) affecting the computation of income derived from a partnership shall be made by the partnership. For example, elections of methods of accounting, of computing depreciation, of treating soil and water conservation expenditures, and the option to deduct as expenses intangible drilling and development costs, shall be made by the partnership and not by the partners separately. All partnership elections are applicable to all partners equally, but any election made by a partnership shall not apply to any partner's nonpartnership interests.
(2) Exceptions. (i) Each partner shall add his distributive share of taxes described in section 901 paid or accrued by the partnership to foreign countries or possessions of the United States (according to its method of treating such taxes) to any such taxes paid or accrued by him (according to his method of treating such taxes), and may elect to use the total amount either as a credit against tax or as a deduction from income.
(ii) Each partner shall add his distributive share of expenses described in section 615 or section 617 paid or accrued by the partnership to any such expenses paid or accrued by him and shall treat the total amount according to his method of treating such expenses, notwithstanding the treatment of the expenses by the partnership.
(iii) Each partner who is a nonresident alien individual or a foreign corporation shall add his distributive share of income derived by the partnership from real property located in the United States, as described in section 871(d)(1) or 882(d)(1), to any such income derived by him and may elect under § 1.871-10 to treat all such income as income which is effectively connected for the taxable year with the conduct of a trade or business in the United States.
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Treas. Reg. §1.703-1(a)Income and deductions.
Income and deductions. (1) The taxable income of a partnership shall be computed in the same manner as the taxable income of an individual, except as otherwise provided in this section. A partnership is required to state separately in its return the items described in section 702(a)(1) through (7) and, in addition, to attach to its return a statement setting forth separately those items described in section 702(a)(8) which the partner is required to take into account separately in determining his income tax. See paragraph (a)(8) of § 1.702-1. The partnership is further required to compute and to state separately in its return:
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Treas. Reg. §1.703-1(b)Elections of the partnership—(1) General rule.
Elections of the partnership—(1) General rule. Any elections (other than those described in subparagraph (2) of this paragraph) affecting the computation of income derived from a partnership shall be made by the partnership. For example, elections of methods of accounting, of computing depreciation, of treating soil and water conservation expenditures, and the option to deduct as expenses intangible drilling and development costs, shall be made by the partnership and not by the partners separately. All partnership elections are applicable to all partners equally, but any election made by a partnership shall not apply to any partner's nonpartnership interests.
(2) Exceptions. (i) Each partner shall add his distributive share of taxes described in section 901 paid or accrued by the partnership to foreign countries or possessions of the United States (according to its method of treating such taxes) to any such taxes paid or accrued by him (according to his method of treating such taxes), and may elect to use the total amount either as a credit against tax or as a deduction from income.
(ii) Each partner shall add his distributive share of expenses described in section 615 or section 617 paid or accrued by the partnership to any such expenses paid or accrued by him and shall treat the total amount according to his method of treating such expenses, notwithstanding the treatment of the expenses by the partnership.
(iii) Each partner who is a nonresident alien individual or a foreign corporation shall add his distributive share of income derived by the partnership from real property located in the United States, as described in section 871(d)(1) or 882(d)(1), to any such income derived by him and may elect under § 1.871-10 to treat all such income as income which is effectively connected for the taxable year with the conduct of a trade or business in the United States.
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Treas. Reg. §1.703-1(i)The standard deduction provided in section 141.
The standard deduction provided in section 141.
(ii) The deduction for personal exemptions provided in section 151.
(iii) The deduction provided in section 164(a) for taxes, described in section 901, paid or accrued to foreign countries or possessions of the United States. Each partner's distributive share of such taxes shall be accounted for separately by him as provided in section 702(a)(6).
(iv) The deduction for charitable contributions provided in section 170. Each partner is considered as having paid within his taxable year his distributive share of any contribution or gift, payment of which was actually made by the partnership within its taxable year ending within or with the partner's taxable year. This item shall be accounted for separately by the partners as provided in section 702(a)(4). See also paragraph (b) of § 1.702-1.
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Treas. Reg. §1.703-1(v)The net operating loss deduction provided in section 172.
The net operating loss deduction provided in section 172. See § 1.702-2.
(vi) The additional itemized deductions for individuals provided in part VII, subchapter B, chapter 1 of the Code, as follows: Expenses for production of income (section 212); medical, dental, etc., expenses (section 213); expenses for care of certain dependents (section 214); alimony, etc., payments (section 215); and amounts representing taxes and interest paid to cooperative housing corporation (section 216). However, see paragraph (a)(8) of § 1.702-1.
(vii) The deduction for depletion under section 611 with respect to domestic oil or gas which is produced after December 31, 1974, and to which gross income from the property is attributable after such year.
(viii) The deduction for capital gains provided by section 1202 and the deduction for capital loss carryover provided by section 1212.
52 Citing Cases
1978 Act § 703(p)(1)(B), 92 Stat.
event’ which fixes the loss with certainty.”17 13Commissioner v. Tufts, 461 U.S. 300, 307, 312-313 (1983). 14While partnerships usually do not pay income tax, sec. 701, the partnership’s taxable income is generally computed at the partnership level, sec. 703, and then reported as distributive shares by its partners, sec. 702. 15See Policy Holders Agency, Inc. v. Commissioner, 41 T.C. 44, 47 (1963). 16Cozzi v. Commissioner, 88 T.C. 435, 445 (1987). 17Cozzi v. Commissioner, 88 T.C. at 445 (citing
event’ which fixes the loss with certainty.”17 13Commissioner v. Tufts, 461 U.S. 300, 307, 312-313 (1983). 14While partnerships usually do not pay income tax, sec. 701, the partnership’s taxable income is generally computed at the partnership level, sec. 703, and then reported as distributive shares by its partners, sec. 702. 15See Policy Holders Agency, Inc. v. Commissioner, 41 T.C. 44, 47 (1963). 16Cozzi v. Commissioner, 88 T.C. 435, 445 (1987). 17Cozzi v. Commissioner, 88 T.C. at 445 (citing
lude two components, the second ofwhich is an individual's "distributive share (whether or not distributed), as determined -52- [*52] under section 704, ofthe income (or minus the loss), described in section 702(a)( * * * [8]) and as computed under section 703, from any trade or business carried on by any partnership ofwhich is he a member." The mandate that the individual's distributive share ofa partnership loss be "determined under section 704" requires consideration ofsection 704(d).
703, that was enacted long before the APA. Section 6213(a) authorizes us to "redetermin[e]" a tax deficiency, and our scope ofreview has historically been de novo. M Ax v. Commissioner, 146 T.C. 153, 161-63 (2016); see also QinetiQ US Holdings, Inc. & Subs. v. Commissioner, 845 F.3d 555, 560 (4th Cir. 2017) ("Some agency-specific statutes, how
tax at the partnership level; instead, persons carrying on business as partners are liable for income tax only in their separate or individual capacities. Sec. 701; see secs. 702, 704 (providing rules for determining partners' distributive shares), sec. 703 (providing rules for computing taxable income ofa partnership). A partner must take into account his or her distributive share ofeach item ofpartnership income, gain, loss, deduction, and credit. Sec. 702(a); Vecchio v. Commissioner, 103 T.C
703, "Form and Venue ofProceeding", provides: The form ofproceeding forjudicial review is the special statutory review proceeding relevant to the subject matter in a court specified by statute or, in the absence or inadequacy thereof, any applicable form oflegal action, including actions for declaratory judgments or writs ofprohibitory or mand
Section 62(e) defines "unlawful discrimination" to in- - 11 - [*11] clude (among other things) acts that are unlawful under "Section 703, 704, or 717 ofthe Civil Rights Act of 1964 (42 U.S.C.
tax at the partnership level; instead, persons carrying on business as partners are liable for income tax only in their separate or individual capacities. Sec. 701; see secs. 702, 704 (providing rules for determining partners' distributive shares), sec. 703 (providing rules for computing taxable income ofa partnership). A partner must take into account his or her distributive share ofeach item ofpartnership income, gain, loss, deduction, and credit. Sec. 702(a); Vecchio v. Commissioner, 103 T.C.
tax at the partnership level; instead, persons carrying on business as partners are liable for income tax only in their separate or individual capacities. Sec. 701; see secs. 702, 704 (providing rules for determining partners' distributive shares), sec. 703 (providing rules for computing taxable income ofa partnership). A partner must take into account his or her distributive share ofeach item ofpartnership income, gain, loss, deduction, and credit. Sec. 702(a); Vecchio v. Commissioner, 103 T.C.
tax at the partnership level; instead, persons carrying on business as partners are liable for income tax only in their separate or individual capacities. Sec. 701; see secs. 702, 704 (providing rules for determining partners' distributive shares), sec. 703 (providing rules for computing taxable income ofa partnership). A partner must take into account his or her distributive share ofeach item ofpartnership income, gain, loss, deduction, and credit. Sec. 702(a); Vecchio v. Commissioner, 103 T.C.
tax at the partnership level; instead, persons carrying on business as partners are liable for income tax only in their separate or individual capacities. Sec. 701; see secs. 702, 704 (providing rules for determining partners' distributive shares), sec. 703 (providing rules for computing taxable income ofa partnership). A partner must take into account his or her distributive share ofeach item ofpartnership income, gain, loss, deduction, and credit. Sec. 702(a); Vecchio v. Commissioner, 103 T.C.
- 21 - LARO, J., concurring: The Court today appropriately overrules the opinion of the Court in Ewing v.
m tax (AMT) and the 2-percent floor effectively will eliminate most of the tax benefit of petitioners' Schedule A deduction for the legal fees. Sec. 56(b)(1) (A) (i). We also note that, under the American Jobs Creation Act of 2004, Pub. L. 108- 357, sec. 703, 118 Stat. 1546, sec. 62(a) was amended, effective Oct. 22, 2004, and legal fees relating to certain discrimination lawsuits (including lawsuits similar to petitioner's lawsuit against the Company) paid after Oct. 22, 2004, with respect to a
703 (2000) (review in absence of special statutory proceeding); Owner-Operators Indep. Drivers Association v. Skinner, 931 F.2d 582, 585 (9th Cir. 1991) (default rule is review in federal district court under general federal question jurisdiction). --- CONCURRENCE --- Laro, J., concurring: The Court today appropriately overrules the Opinion o
tipulation regarding the deductibility of attorney’s fees, Decision will be entered under Rule 155. 4 The Supreme Court in Commissioner v. Banks, 543 U.S. __, 125 S. Ct. 826 (2005), noted that the American Jobs Creation Act of 2004, Pub. L. 108-357, sec. 703, 118 Stat. 1546, amending the I.R.C. by adding sec. 62(a)(19) was not effective at the time of the transaction. Since the Act is not retroactive, the Supreme Court did not consider it. Likewise, we need not consider whether it might apply to
Secondly, section 703 describes how partnership income is computed;3 i.e., how taxable income is calculated from gross 3 SEC.
tax at the partnership level; instead, persons carrying on business as partners are liable for income tax only in their separate or individual capacities. Sec. 701; see secs. 702, 704 (providing rules for determining partners’ distributive shares), sec. 703 (providing rules for computing taxable income of a partnership). A partner must take into account his or her distributive share of each item of partnership income, gain, loss, deduction, and 78 Mr. van Merkensteijn paid $120,000 and gave a $
703; United States v. Basye, 410 U.S. 441, 448 (1973). A partnership must report its income and expenses on an aggregate approach, and once these amounts are ascertained, the partnership form is disregarded, and the income and expenses flow through to the individual partners. United States v. Basye, supra. Therefore, while petitioner may be ab
APA section 703 governs the form and venue of judicial review under the APA.
"The legislative history of APA section 703 makes clear that where there is a special statutory review proceeding relevant to the subject matter, that special statutory review 'shall not be disturbed'." Ewing v.
471, 505 (1982) (“the partnership is an independently recognizable entity apart from its partners for the purposes of the calculation of its taxable income under section 703”), affd.
APA section 703 governs the form and venue of judicial review under the apa. See 5 U.S.C. sec. 703 (2000). The legislative history of apa section 703 makes clear that where there is a special statutory review proceeding relevant to the subject matter, that special statutory review “shall not be disturbed”. S. Comm, on the Judiciary, 79th Cong., 1st Ses
In pertinent part, APA section 702 provides: “A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action - 17 - within the meaning of a relevant statute, is entitled to judicial review thereof.” In full, APA section 703 provides: The form of proceeding for judicial review is the special statutory review proceeding relevant to the subject matter in a court specified by statute or, in the absence or inadequacy thereof, any applicable form of legal
Pursuant to section 703, a partnership computes its taxable income in the same manner as an individual, except that certain items must be stated separately and certain deductions are not allowed.
Each partner’s distributive shares of these items are determined pursuant to the partnership agreement. Sec. 704(a). The partner is required to take his distributive shares into account in determining his income tax. Sec. 702(a). The investment credit is one of the partnership items for which each partner must take into account his distri
Each partner’s distributive shares of these items are determined pursuant to the partnership agreement. Sec. 704(a). The partner is required to take his distributive shares into account in determining his income tax. Sec. 702(a). The investment credit is one of the partnership items for which each partner must take into account his distri