partnership taxes
I withdrew as a partner in a general partnership in november 2005. There were 10 partners, 5 others also withdrew soon after I. In 2006 the remaining partners reported to the IRS that each partner had $160,000.00 in income. The partnership had the income, I only received $12,500.00 in 2005. All other partners including other withdrawn partners received money from partnership to pay taxes. I was the only one who did not receive money to pay taxes. I and other partners have yet to receive an accounting of partnership when we withdrew. We have since had to file lawsuit to receive our share of partnership. It has now been ongoing for more than 2 years. Because of this I have not been able to pay the taxes owed on this income received by the partnership. Is there something I can do because all other partners taxes were paid by partnership and not mine?
2 Answers from Attorneys
Re: partnership taxes
Your problem is a big issue in partnership disputes (also true for S Corporations and LLC's which are also pass-through entities.) One of the techniques in squeezing out partners is to give them phantom income. They are forced to pay taxes on income they do not receive.
Since you are obligated to pay tax on the income imputed to you, I suggest you get a tax attorney to work with your litigation attorney. This may be a matter for a "doubt as to liability" Offer in Compromise.
I hope this helps!
Ron Cappuccio
http://www.TaxEsq.com
Re: partnership taxes
You have been been taken advantage of by the remaining partners because you were not quick enough to get into court to fight for your rights. As you are in litigation now, your attorney needs to consult with a tax attorney to get this issue addressed. You may be able to seek damages/sanctions against the remaining partners.
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