What are separately stated items

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Reference no: EM13873992 , Length: 200 words

Frame a response to the given answer in 200 - 250 words.

Question : What are separately stated items on a K-1? Why is it necessary to separate these items from ordinary income?

The K-1 form allows the partner to allocate the ordinary losses, special income and deductions, as well as gains and losses for each partner.  They then file the K-1 form with their individual tax returns.  They are not allowed to take the standard deduction, exemptions, and foreign taxes paid or net operating losses for the business.

It is necessary to separate these items from ordinary income as the income generated from the partnership is essentially self-employed income and the partners will have to pay income taxes respectively on the income generated from the business.

Reference no: EM13873992

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