Many Partnerships Keeping Two Sets of Books Instead of Required Three

With the next earnings season around the corner, many partnerships and limited liability companies (LLC) taxed as partnerships may find it surprising that they should be keeping three sets of books. These entities generally only maintain two sets of books: generally accepted accounting principles (GAAP) basis and tax basis.

There is a more important set of books that should be maintained, but is often not: “Section 704(b)” books. This set of books is based on the Section 704(b) regulations and attempts to reflect the economics of the deal.

Grant Thornton LLP’s most recent issue of Marquee, a newsletter for the hospitality and real estate industries, illustrates the importance of maintaining all three books in.

“To the surprise of many partners, the capital accounts referred to in their partnership or LLC agreements are Section 704(b) capital accounts – not GAAP or tax,” said Jerry Williford, a senior manager in Grant Thornton’s tax practice. “Even though Section 704(b) books are not required to be shown on the partnership’s tax return balance sheet, they need to be available as they determine the economics of the deal.”

To read more about the three sets of books, especially Section 704(b) books, download the latest issue of Marquee at www.GrantThornton.com/Marquee.

About Grant Thornton LLP

Grant Thornton LLP is the U.S. member firm of Grant Thornton International, one of the leading global accounting, tax and business advisory organizations. Through member firms in more than 110 countries, including 50 offices in the United States, the partners and employees of Grant Thornton member firms provide personalized attention and the highest quality service to public and private clients around the globe.

Article Source: http://www.share.onlypunjab.com

For more information visit www.GrantThornton.com.

Please Rate this Article

5 out of 54 out of 53 out of 52 out of 51 out of 5 

Not yet Rated