Partners Auto Expense Reimbursed

This has probably been beat to death on the forum, but I can't find it.

Two different partnerships, both reimburse partners for auto expenses, using standard mileage method, and run the expense through partner loan account at the end of the year. when they tally up miles driven.

One of the partnerships addresses reimbursing its partners for auto and other specific partnership expenses, the other does not. The second one is owned by a married couple who are MFS.

Can the partnership deduct these expenses? I know you can't follow the reimbursed expense rules as the partners are not employees.

TYIA

The partnership would reimburse the partners and take a deduction.
If the one's agreement doesn't mention reimbursement then you can either reimburse or they have the ability to just deduct their expenses as unreimbursed partnership expenses. It'll show up on sch E pg 2 and reduce the p-ship income (and SE income) on the individual return.

In order for the partner to deduct the expenses on his return there must be “an agreement among partners, or a routine practice equal to an agreement, that requires a partner to use his or her own funds to pay a partnership expense.” (McLauchlan v. Comm., T.C. Memo. 2011-289).

Thanks for the reply. The partners in both partnerships want the deduction taken at partnership level. There is a lot of info regarding deducting the "unreimbursed expense" on the partner's 1040 but I found nothing regarding 'partners' business expense reimbursement - only rules for 'employee' business expense reimbursement. Again - thanks

I am trying to input this in Tax Act and would have to force it to get the data in.
Should reimbursed partnership expenses (ie business mileage & other out of pocket expenses) be booked as guaranteed payments? Maybe for use of capital? These expenses were run through the partner's loan account.

No.

Enter unreimbursed partnership expenses from nonpassive activities on a separate line in column (i) of line 28. Do not combine these expenses with, or net them against, any other amounts from the partnership.
If the expenses are from a passive activity and you are not required to file Form 8582, enter the expenses related to a passive activity on a separate line in column (g) of line 28. Do not combine these expenses with, or net them against, any other amounts from the partnership.
Enter “UPE” in column (a) of the same line.

Thanks Beardenjv...these business expenses were 'reimbursed' by the partnership (adjusted through the partner's loan account) so I dont think they fit your scenario.

Also, if partner holds mortgage on partnership property, is the interest paid to the partner a GP? I assume it is a GP as it is paid for "use of capital" depending on how one defines 'capital'. If so, would the GP be just the interest portion or the debt portion as well. It throws my M-2 out of balance.

Err, sorry, I misread.

Reimbursements don't need to be reported anywhere on a tax return. Or you could think of it this way: Report the expense I as described above as UPE, and then reduce the amount on that UPE line by the amount of the reimbursement, and now it's $0. Which is kind of pointless - just leave it off.

if partner holds mortgage on partnership property, is the interest paid to the partner a GP? I assume it is a GP as it is paid for "use of capital" depending on how one defines 'capital'. If so, would the GP be just the interest portion or the debt portion as well. It throws my M-2 out of balance.

Guaranteed payments are paid to partners because they're partners. But partnerships can pay partners for other stuff that isn't in regard to their being partners, and that's not a guaranteed payment.

The interest on the mortgage is a perfect example. The partnership is paying interest to the lender/mortgagee, who also happens to be a partner. This is regular interest expense for the partnership and regular interest income for the partner. Also, you may need to file a Form 1099-INT. It's not a guaranteed payment. It's totally like normal interest. (Except that it's self-charged interest, which is fun if the partner is passive, and also self-charged interest isn't subject to NIIT if the partner isn't passive, and also the partnership can't accrue the interest until it's taxable for the partner.)

Thanks again...I tend to overthink these things