In a Partnership what's better: report expenses on 1065 or as UPE on Sch. E? Ex: Reimburse ink costs & deduct as biz expense (1065) or require ink paid by partners (UPE)?

[Anonymous]

In a Partnership is there an advantage to reporting expenses on 1065 over reporting as UPE on Schedule E? Ex: Reimburse ink costs for Partners and deduct as a business expense on the 1065 or require that ink be paid for by Partners (via Partnership Agreement) and individually claimed as UPEs on their own 1040s? Do either of these options lead to a lesser tax burden or do they end up being the same?

[IRonMaN · Accepted solution]

It's always cleaner to have the business pay for all of the partnership expenses.  That is as long as all of the partners are focused on what constitutes necessary business expenses.

[abctax55]

First, it depends on the partnership agreement.  If the agreement doesn't specify that the expenses are NOT to be reimbursed you can't take them as UPE anyway.

Second, the handling of UPE with regards to QBID is still undecided.