Partners and Shareholders. The partnership or S corporation should not include the distributive share of these entities in determining the partnership or S corporation's income tax liability. Partnerships whose activities and assets are limited to investment in stocks, bonds, futures, options or debt obligations other than debt instruments directly secured by real or tangible personal property are not subject to the partnership tax merely because the investment decisions, trading orders, research and the like are conducted by a general partner from a Maryland location. Partnerships, however, such as brokerage firms which deal with the general public, are not exempt if the business is conducted within Maryland. A. Partnership A was formed exclusively to conduct investment trading activities for its partners only, and invests exclusively in stocks, bonds, futures and options.
Investment management is conducted by general partner B from a Maryland office.
The partnership has three nonresident partners - C, D and E. Each of the nonresident partner's share of the trading results of the partnership is proportionate to their investment capital. The partnership is required to file a Maryland income tax return, but it is exempt from the partnership tax. C, D and E are exempt from filing nonresident income tax returns if they have no other income from Maryland sources. B. Partnership V owns a shopping center in Maryland as well as a substantial investment portfolio consisting of stocks, bonds and other intangible investments. Management is conducted by general partner X from a New York location.