Regarding partnership income, which of the following statements is false about a general partner's tax responsibilities?

The statement about a general partner's tax responsibilities that is false is that a general partner must reduce the amount of income by certain expenses before entering it on Schedule SE. In reality, general partners are required to report their self-employment income, which is typically derived directly from the partnership's earnings. They report their net earnings from self-employment without needing to reduce that income by expenses specifically before reporting it on Schedule SE.

Understanding this is important because tax reporting for partnerships, particularly for general partners, is unique. General partners actively participate in the business and therefore must report their proportionate share of partnership income. This includes any income they earn from the partnership, which is fully subject to self-employment tax. While partners can deduct certain business expenses on their individual tax returns, this process does not apply individually before reporting income on Schedule SE.

The other statements are true in the context of partnership income. General partners include net earnings from self-employment on their tax returns. Limited partners indeed report only guaranteed payments for services, which differ from the earnings of general partners. Additionally, a deceased partner's share of income is recognized during the partnership's operation for tax purposes, which is an aspect of tax legislation that ensures fair taxation based on the income generated by the