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#1 Posted : Monday, October 8, 2018 1:59:55 AM(UTC)

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Somewhere I read if an investment club has over 10 partners there are added tax forms that need to be completed beside the normal tax forms. Is this correct? If so, what are those forms?

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#2 Posted : Tuesday, October 23, 2018 3:48:28 AM(UTC)

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Sorry this has taken awhile to answer. I have been doing some research on the topic.
There was a small partnership exception to some tax related items. For some purposes partnerships with 6 or fewer partners would not be included in the definition of a partnership. Some people took this to mean such partnerships were not required to file federal partnership tax returns, Form 1065. A tax court ruled this is not the case. Small partnership must file form 1065. However, small partnerships would get automatic abatement of late filing penalties if all partners reported their share of partnership income on their personal returns.
To muddy the waters a bit, the new audit rules for partnerships that became effective for the 2018 tax year changed some of the tax code related to small partnership exceptions. My research found the current status of the small partnership exception is unclear. It may be some time before a tax court ruling or new IRS regulations clear up some ambiguities related to small partnerships. To be on the safe side, keep filing your 1065 on time so you won't need to test the old automatic abatement rules for small partnerships.

Russell Malley
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