Partnership Taxation

Revenue and Taxation Code Division 2, Part 10, Chapter 10 deals with partners and partnerships under the California Personal Income Tax Law.

Section 17851 states that Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to partners and partnerships, applies.

Section 17851.5 states that a partnership as an entity is subject to Chapter 10.5 (commencing with Section 17935), relating to tax on limited partnerships, Chapter 10.6 (commencing with Section 17941), relating to tax on limited liability companies, and Chapter 10.7 (commencing with Section 17948), relating to tax on limited liability partnerships.

Section 17853 states that Section 703(a)(2) of the Internal Revenue Code is modified to additionally provide that the deduction for taxes provided in Section 164(a) of the Internal Revenue Code with respect to taxes paid to another state are not be allowed to the partnership.

Section 17854 provides that, for purposes of computing “taxable income of a nonresident or part-year resident,” in the case of a nonresident partner, guaranteed payments are included in that computation as gross income from sources within this state in the same manner as if those payments were a distributive share of that partnership.

Section 17855 defines the term “unrealized receivables.”

Section 17856 states that Section 751(d)(3) of the Internal Revenue Code, relating to appreciated inventory items subject to tax as a gain on foreign investment company stock, does not apply.

Section 17857 states that Section 751(e) of the Internal Revenue Code, relating to the limitation on tax attributable to deemed sales of Section 1248 stock, does not apply.

Section 17858 provides that any election relating to the computation of depreciation are to be made by the partnership and each partner must take into account his or her distributive share of the depreciation amount computed in accordance with that election.

Section 17859 states that the amendments made by Section 13504 of the Tax Cuts and Jobs Act to Section 708 of the Internal Revenue Code, relating to the continuation of a partnership, applies. The amendments made by Section 13504 of the Tax Cuts and Jobs Act to Section 743(e) of the Internal Revenue Code, relating to alternative rules for electing investment partnerships, applies.

The amendments made by Section 13504 of the Tax Cuts and Jobs Act to Section 168(i)(7)(B) of the Internal Revenue Code, relating to transactions covered, applies. The FTB specifies the form and manner in which the election are to be made, as well as whether an amended return or any other information shall be required.

Section 17865 states that Part IV of Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code (commencing with Section 771 of the Internal Revenue Code), does not apply.