Connect With Us
If you decide to conduct your business as a partnership, neither the partnership itself nor you as one of the partners would normally be able to deduct the expenses you paid to organize the partnership. However, your partnership can elect to treat these organizational costs as deferred expenses that can be amortized (deducted in equal amounts) over a period of 180 months, starting with the month in which the partnership begins business.
If you decide that your partnership should not make this election, the organizational costs must be added to the tax basis of your partnership interest. In that case, when your partnership interest is sold or the partnership itself is dissolved, the amounts paid for the organizational expenses will reduce the amount of your capital gain or loss.
In addition, taxpayers may now elect to deduct up to $5,000 of their startup expenses for the tax year in which their trade or business begins, with the remainder amortized over 180 months.
Requirements. To qualify for the amortization election, an expense must satisfy these three conditions:
Examples of organizational costs that can be amortized include:
Examples of costs that can't be amortized (and instead must be included in the basis of the partnership interest) include: