Change in Ownership
PrerequisitesYou should be familiar with or have completed the Income & Related Items and Balance Sheet, M-1, Capital & Liabilities exercises in this section. ObjectiveIn this exercise, you will enter the necessary information to reflect a change in ownership based on weighted averages. |
Facts
Enter the following information for a sample client:
| Client number | TUTPAR4 |
| Client Information | Data entry: |
| Partnership Name | Tutorial Partnership 4 |
| Partnership DBA | Exercise 4 |
| Fiscal Year End | 12 |
| Type of entity | General Partnership |
| Tax matters partner # | 1 |
| Partner Information | Data entry: |
| Partner Name | Partner 1 |
| Type of Entity | Individual |
| General Partner? |
|
| Partner Name | Partner 2 |
| Type of Entity | Individual |
| General Partner? |
|
| Partner Name | Partner 3 |
| Type of Entity | Individual |
| General Partner? |
|
| Partner Percentages | Data entry: |
| Partner 1 - Beginning of year | 25% |
| Partner 2 - Beginning of year | 75% |
| Partner 3 - Beginning of year | 0% (No entry required) |
| Partner 1 - End of year | 25% |
| Partner 2 - End of year | 60% |
| Partner 3 - End of year | 15% |
Partner 3 entered this partnership on 5/15/2005.
|
Change in Ownership (Weighted Average) |
Data entry: |
| Partner 1, Period 1 | |
| Beginning date | 1/1/2005 |
| Ending Date | 12/31/2005 |
| Percentage | 25 |
| Partner 2, Period 1 | |
| Beginning date | 1/1/2005 |
| Ending Date | 5/14/2005 |
| Percentage | 75 |
| Partner 2, Period 2 | |
| Beginning date | 5/15/2005 |
| Ending Date | 12/31/2005 |
| Percentage | 60 |
| Partner 3, Period 1 | |
| Beginning date | 1/1/2005 |
| Ending Date | 5/14/05 |
| Percentage | -1 |
| Partner 3, Period 2 | |
| Beginning date | 5/15/2005 |
| Ending Date | 12/31/2005 |
| Percentage | 15 |
| Income | Data entry: |
| Gross receipts or sales* | $100,000 |
*This income was received evenly throughout the year.
Program Considerations
- Under the weighted-average method, the income, expenses, etc. of the partnership are prorated based on the number of days during the year each partner held an interest in the partnership.
- If the allocation periods are the same for all partners, they can be entered in the Allocation Override Dates section of Screen 9, Change in Ownership.
- There are a maximum of 12 different periods available in the program. You must enter percentages for each period for any partner affected by the change. If the percentage for any period is zero, enter -1.
How?
To enter change in ownership (weighted-average):
- Open the sample client.
- Open the Change in Ownership screen from the Contents tab.
- Enter the appropriate allocation dates and percentages from the information above (Partner 2 shown as an example).
Note: The beginning date of the first period is the first day of the tax year and the ending date of the last period is always the last day of the tax year.
- In the Allocation Period Information section, enter the information from the Partner Percentages table above in the appropriate input fields
Tips & Shortcuts
The formula for calculating the weighted-average is:
Review
You should have entered the change in ownership information to achieve a weighted-average income distribution and produced the following results on the Partners' Allocation Percentages worksheet:
Troubleshooting
Problem: The percentages on my Partners' Allocation Percentages worksheet do not equal 100.000000 .
Solution: Verify that you entered the percentages in Screen 8, Partner Percentages in xx.xxxxxx format.