Exam 10: Partnership Taxation

Leslie contributes a building worth $88,000, with an adjusted basis of $40,000, to a partnership in exchange for a 50 percent interest in the partnership's capital and profits. What is the amount of Leslie's basis in her partnership interest immediately after the contribution?

Lilac Designs is a partnership with a tax year that ends November 30, 2015. During that year, William, a partner, received $4,000 per month as a guaranteed payment and his share of partnership income after guaranteed payments was $20,000. For December of 2015, William received a guaranteed payment of $10,000. Calculate the amount of income from the partnership that William should report for his tax year ended December 31, 2015.

A partnership generally must adopt the same tax year as its majority partners.

Because a partnership does not pay taxes, a partnership is not recognized as a legal entity under civil law.

Lucky's original contribution to the Boxwood Partnership was land with a basis of $5,000 and a market value of $55,000. Her share of the taxable income from the partnership since her original contribution has been $95,000 and Lucky has received $45,000 in cash distributions from the partnership. Lucky did not recognize any gains as a result of the distributions. Calculate Lucky's current basis in her partnership interest.

Partnership losses that are not used because a partner's basis in the partnership interest is zero may not be carried forward and are lost by the partner.

Losses are disallowed for transactions between a partnership and a partner who has a 50 percent interest in the partnership.

Debbie and Betty operate the D & B partnership. Betty, a 50 percent partner, receives a guaranteed payment of $10,000 for her services in operating the partnership. The partnership has income before the guaranteed payment of $5,000. What is the taxable income Debbie and Betty must each report from the partnership for the year? Debbie should report income of $__________. Betty should report income of $__________.

The holding period of property contributed to a partnership includes the period of time that the contributor has held the property.

For the following separate, independent situations indicate with a "Yes" if a partnership return needs to be filed. Mark with a "No" if a partnership return is not required. a.Tony and Gina form a joint venture to import goods from South Korea. b.Nancy decided to start her own private investigative business. c.Uncle Pennybag's estate assets are pooled together until they can be distributed to the beneficiaries. d.Howie, Dewey, and Cheatem form an LLC. e.Flora, Fauna, and Merryweather start a child care business.No official documents are drawn up.

In general, income is recognized by the partner when a partnership interest is received in exchange for services rendered to the partnership.

For tax purposes, in computing the ordinary income of a partnership, a deduction is allowed for:

Which of the following items must be reported separately from ordinary income or loss on a partnership return?

If a partner has a more than 50 percent interest in a partnership, a capital gain resulting from the sale of property to the partnership will be taxed as ordinary income to the partner, provided the property is not a capital asset to the partnership.

Jim's basis in his partnership is $200,000. His share of the current year partnership income is $60,000. The partnership paid him a $75,000 distribution in the current year. What is his new basis in the partnership at the end of the year and what is his taxable income from the partnership?

Salix Associates is a partnership with an October 31 year-end. For the fiscal year ended October 31, 2015, Salix Associates reported ordinary income of $100,000, after deducting guaranteed payments. Max, a calendar year taxpayer, is a 30 percent partner in the partnership and received $2,000 monthly as a guaranteed payment for the calendar year 2014, and $2,100 monthly for the calendar year 2015. What is the total income from the partnership that Max should report on his 2015 individual income tax return?

An equal partnership is formed by Rita and Gerry. Rita contributes cash of $10,000 and a building with a fair market value of $150,000, adjusted basis of $55,000 and subject to a liability of $60,000. Gerry contributes cash of $100,000. What is the partnership's basis in the building contributed by Rita?

The tax year of a partnership generally closes upon entry of a new 20% partner.

There is no general partner required in a limited liability company (LLC).

Barry owns a 50 percent interest in B&B Interests, a partnership. His brother, Benny, owns a 35 percent interest in that same partnership, and the remaining 15 percent is owned by an unrelated individual. During the current year, Barry sells a rental property with a basis of $60,000 to B&B Interests for $100,000. The partnership intends to hold the rental as inventory for resale. What is the amount and nature of Barry's gain or loss on this transaction?