Partnerships: from the tax-exempt's perspective

The sharing of income with a taxable partner in an arrangement under which the tax-exempt "earns" the income, while the taxable entity actually enjoys the predominate economic benefits, is a troublesome development from a taxable viewpoint. Equally troublesome, however, is the same kind of...

Full description

Saved in:

Bibliographic Details
Published in:	Taxes Vol. 84; no. 3; p. 209
Main Author:	Rosow, Stuart L
Format:	Journal Article Trade Publication Article
Language:	English
Published:	Riverwoods CCH, Inc 01-03-2006 CCH INCORPORATED
Subjects:	Art galleries & museums Capital gains tax Excess benefit transactions Excise taxes Fair market value Internal Revenue Code Joint ventures Laws, regulations and rules Partnership Partnerships Profits Revenue sharing Sanctions Section 501(c) Tax exempt organizations Tax exemption Taxation United States > US
Online Access:	Get full text
Tags:	Add Tag No Tags, Be the first to tag this record!

Description
Summary:	The sharing of income with a taxable partner in an arrangement under which the tax-exempt "earns" the income, while the taxable entity actually enjoys the predominate economic benefits, is a troublesome development from a taxable viewpoint. Equally troublesome, however, is the same kind of arrangement in the oversight of tax-exempt entities. the issues to be considered are when the tax-exempt organization should be sanctioned for conduct that supports tax avoidance by a taxable entity, and what those sanctions should be. This article will consider these issues in the context of a simple business transaction involving a tax-exempt hospital and some of its doctors. The transaction considered has valid, readily perceived business purposes, independent of tax consequences. Of course, the transaction is well structured to permit the taxable participants the maximum tax advantage. The transaction is analyzed after briefly considering the relevant rules governing Section 501 (c)(3) organizations, a certain class of tax-exempt organizations. These include the rules under Section 501 (c)(3) governing the requirements for an exemption; the rules governing intermediate sanctions; and the general authority analyzing the propriety of tax-exempt/taxable joint ventures. The commentary is that, unfortunately, these tools which are available to address these issues presented by taxable, tax-exempt partnerships are limited and inadequate for the task at hand.
ISSN:	0040-0181