Can I remain a partner with 0% profit/loss/capital?

[allymia]

From a tax perspective, am I able to remain in a partnership with 0% profit/loss/capital? In other words, can I be a partner that earns no income, does not claim any losses, and will not earn any capital on future dealings? I will no longer be actively participating in a partnership formed by myself, my mum, and my sister. However, I'm offering to remain on pro bono to help with their accounting. I'm planning to file our Form 1065 with 0% profit/loss/capital for my end of year, but without checking the Final Return box. It's been difficult to find answers surrounding this specific situation and calling the IRS didn't yield any helpful insights other than the suggestion of filling out Form 8822B if I am fully exiting the partnership - but I couldn't get answers to my specific question. Hoping the community can help!

[M-MTax]

An unincorporated organization with two or more members is generally classified as a partnership for federal tax purposes if its members carry on a trade, business, financial operation, or venture and divide its profits.

[RobertB4444]

No.  A partner has to own a part of the partnership or they are no longer a partner.

You might suggest reducing your share down to a half a percent or something.  But it can't be zero and still have you as a partner.

@allymia 

[allymia]

Thank you for the reply! That certainly makes sense and seems to be a reasonable suggestion. I appreciate your input!

[Rick19744]

No, you are not a partner in a partnership if you do not share in the profits, losses of the business.

You can certainly continue to offer your services pro bono, but should not be included in the form 1065 filings.

If you have previously been a partner in the partnership, and will no longer continue, then you:

• Should receive a final K-1
• Should receive a liquidating distribution when exiting.  If you are not receiving any liquidating distribution upon exit, you could still have tax consequences on "deemed distributions".  This area is way beyond the scope of discussing in the community.
• Depending on past operations, if you used debt to take any losses, you could have a tax consequences
• Hopefully you have maintained your tax basis (assuming you were a partner), as this is key in determining your gain or loss upon your exit; which is the year in which your partnership interest becomes 0% profit, loss or capital.
• The form mentioned in your facts has nothing to do with whether you are a partner or not.