What is the maximum amount that the partnership can deduct as an organization and syndication expense for the first year in which the partnership begins business, assuming the business began on October 1?

Question

The RT Limited Partnership incurs the following expenses during the time that the partnership is being organized:

Attorneys' fees:
For drawing up the partnership agreement $10,000
For advice on marketing the partnership interests on a stock exchange 14,000

Accountants' fees:
For establishing the accounting system 6,000
For the first quarter's bookkeeping 600

Answer 1

he attorneys' fees for drawing up the partnership agreement and the accountants' fees for establishing the accounting system are eligible to be amortized as organization and syndication expenses. $5,000 of the expenses can be deducted in the first year and the remainder amortized over 180 months, resulting in a $61 deduction per month ($11,000/180). The total expense is $5,183 [$5,000 + (61 × 3)]. The accountants' fees for bookkeeping are deductible as trade or business expenses under Sec. 162. The attorneys' advice is deducted when the partnership terminates or is liquidated.