Introduction to Partnership Taxation

This series of three tutorials leads students through nine problems involving the taxation of partners and partnerships. The tutorials will be most useful when students have prepared the problems before turning on the computer. After having completed the tutorials, students should have a good understanding of the basic tax rules for partnerships.

The first tutorial involves the formation, operation, and liquidation of a partnership. The student learns how the various Code provisions interrelate, and becomes familiar with I.R.C, §704(c)(1)(A). The second tutorial deals with sale of a partnership interest. The third tutorial involves the tax consequences when a partnership incurs a liability and considers the impact of the passive loss rules.

Each tutorial asks a series of questions in connection with the problems presented in the printed handout material that accompanies this exercise. The tutorial provides suggestions or hints to a student who has given a wrong answer and makes her try again. It also explains the significance of a correct answer. At various times a separate screen summarizes the results or presents important observations. After the fourth wrong answer to any question, the computer always provides the correct answer. To prevent a student from completing the tutorial by guessing blindly and letting the computer supply all the right answers, the program terminates after the computer has had to provide the right answer for three consecutive questions.