Q:
Which of the following statements regarding Real Estate Limited Partnerships (RELPs) is/are correct?
I. A goal of the RELP is to establish a continuity of life for the partners
II. All of the profits from the RELP will pass through to the owners of the business
III. The RELP sends each partner a 1099-Misc to be used to compute their personal tax returns
IV. The limited partnership itself pays no taxes
a) II and IV only
b) II and III only
c) I and II only
d) I and IV only
A:
The correct answer is a):
Limited partnerships are formed to engage in a business venture for a predetermined period of time, one the business goals have been achieved the RELP is dissolved. The main tax advantage of the RELP is that the IRS treats it as a “flow-through” entity, meaning that all of the profits/losses of the RELP are passed to the owners. The RELP itself is not taxed, each partner receives a Schedule K-1 which is used to compute their individual tax return.

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