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the determination of whether the investor's income from a partnership is: (1) trade or business income,...

the determination of whether the investor's income from a partnership is: (1) trade or business income, or (2) category 1 investor income?

1) Is always Category 1 if it is interest income.

2) Is made solely at the partner level.

3) Is made at the partnership level as well as the partner level.

4) Is made at the partnership level.

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Answer #1

The determination is based on the agreement of the investor with the partnership. The authority of entering into agreements with investors is determined at the partner level.  Hence the determination of whether the investor's income from a partnership is trade or business income or category 1 investor income is made at the partnership level as well as the partner level. Answer is 3.

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