Paying Partnership Expenses



Individual partners are often required to incur business expenses that will not be reimbursed by the partnership (such as travel and entertainment expenses). Partners are generally not entitled to deduct partnership expenses on their individual income tax returns. However, if the partnership's agreement or practice requires a partner to pay certain partnership expenses from his or her own funds, with no right to reimbursement from the partnership, the partner is entitled to deduct, in arriving at AGI (on Schedule E), these as trade or business expenses on his or her personal return. These Schedule E deductions should also generally be deducted in computing net self-employment income on Schedule SE.

Strategy: Partners should make explicit the "requirement" that partners incur partnership expenses without right of reimbursement, either as a provision of their partnership agreement or through a written policy of the partnership

This publication is distributed with the understanding that the author, publisher and distributor are not rendering legal, accounting or other professional advice or opinions on specific facts or matters, and, accordingly, assume no liability whatsoever in connection with its use. The information contained in this newsletter was not intended or written to be used and cannot be used for the purpose of (1) avoiding tax-related penalties prescribed by the Internal Revenue Code or (2) promoting or marketing any tax-related matter addressed herein. © 2014