Question

Please Thoroughly Explain which of the following expenses qualify as organizational expenses under IRC Sec 709 and may be deductible?

1. Legal fees for negotiation of partnership agreement?

2. Accounting fees for representations in offering materials?

3. Filing fees?

4. Accounting fees for services incident to organizing the partnership?

5. Fees for tax opinions in the partnership prospectus?

Answer 1

All expenses except option 2 and option 5 are qualified for being deductible as organisation expense

Accounting fees for representations in offering materials AND Fees for tax opinions in the partnership prospectus are syndicate expenses and therefore not qualified to be deducted as organisation expense under IRC Sec 709.

Organizational costs are defined as:

1. those costs that are considered to be incident to the formation of the partnership;
2. those costs that would under normal circumstances or normally be capitalizable; and
3. those costs that would under routine and ordinary circumstances be amortized over the entire life span of the partnership.

Since the costs specified in 1, 3, 4 and 5 are those that fulfill the above requirement are those expenses that qualify as organization expenses under Sec 709 of IRC.