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Paying tax respects to partnership income

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in Small Business Tax,Small Business Tax Deduction Strategies

Q. My husband was a partner in a dry cleaning business when he died. Are payments from the partnership taxed to his estate? M.M.W., Cincinnati

A. Yes. If your husband had been receiving payments representing a distributive share or guaranteed payments in liquidation of his interest in the partnership, the remaining payments made to the estate or other successor are what the tax law calls “income in respect of a decedent.” The estate or successor receiving the payments must include them in income when received.

Tip: You may be able to deduct estate tax attributable to the value of the partnership payments.

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