Exam 10: Partnership Taxation

Wallace and Pedersen have equal interests in the capital and profits of the partnership of Wallace and Pedersen,but are otherwise unrelated.On August 1,2013,Wallace sold 100 shares of Kalmia Mining Corporation to the partnership for its fair market value of $7,000.Wallace had bought the stock in 1998 at a cost of $10,000.What is Wallace's deductible loss for 2013 as a result of the sale of this stock?

During 2013,Jay is a partner in an automobile dealership.Jay's amount at risk at the beginning of the year is $90,000,and during 2013 Jay's share of the dealership's ordinary loss is $120,000. a.What is the amount of the loss from the automobile dealership that Jay may deduct in 2013? b.If the dealership has a profit of $63,000 in 2014,how much of the 2014 income is taxable to Jay?

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

Barbara receives a current distribution consisting of $2,000 cash plus other property with an adjusted basis to the partnership of $2,300 and a fair market value on the date of the distribution of $7,000.Barbara has a 10 percent interest in the partnership and her basis in her partnership interest,immediately prior to the distribution,is $5,000.What is Barbara's basis in the non-cash property received in the current distribution?

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

The "at-risk" rule acts to prevent tax shelters from generating large losses for their investors while exposing them to little personal risk.

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

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 amount of gain must Rita recognize as a result of this transaction?

Oscar and Frank form an equal partnership,the O and F Partnership.Oscar contributes land with an adjusted basis of $45,000,subject to a mortgage of $100,000,in exchange for a partnership interest worth $250,000.Frank contributes cash of $100,000 and performs services for the partnership in exchange for a partnership interest worth $250,000. a.What is the amount of Oscar's recognized gain or loss if any)as a result of the contribution to the partnership in exchange for the partnership interest? b.What is Oscar's basis in his partnership interest immediately after the contribution? c.What is the amount of Frank's recognized income or loss if any)as a result of the receipt of the partnership interest in exchange for the cash and services? d.What is the partnership's basis in the land received from Oscar?

Michael invests in Buxus Interests,a partnership.Michael's capital contribution to the partnership consists of $10,000 cash and equipment with an adjusted basis of $120,000 fair market value of $150,000)subject to a nonrecourse liability of $60,000. a.Calculate the amount that Michael is at-risk in the activity after making the above contribution? b.If Michael's share of the partnership loss in the year after he makes the contribution is $150,000,how much of the loss may be deducted in that year before considering the limitations on passive losses)? Assume the partnership had no other transactions. c.If Michael has any nondeductible loss in part b,what may Michael do with the nondeductible loss?

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.

Nash and Ford are partners who share profits and losses equally.For the year ended December 31,2013,the partnership had book income of $80,000 which included the following deductions: Guaranteed payments to partners: Nash \ 35,000 Ford \ 25,000 Charitable contributions \5 ,000 What amount should be reported as ordinary income on the partnership return for 2013?

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.

Partnership income is taxed at the same tax rates as the income of corporations.

The partnership of Felix and Oscar had the following items of income during the tax year ended December 31,2013: Income from operations \ 156,000 Tax-exempt interest income \ 8,000 Dividend income \ 6,000 What is the total ordinary income from business activities passed through by the partnership for the 2013 tax year?

Loretta contributes property to a partnership in exchange for a 25 percent partnership interest.The property contributed has a fair market value of $45,000 and a basis of $35,000 on the date of the contribution to the partnership.In addition,Loretta receives a 10 percent partnership interest,valued at $18,000,in exchange for services rendered to the partnership.What is Loretta's basis in her partnership interest,immediately after these transactions?

Phil and Bill each own a 50 percent interest in P&B Interests.P&B Interests has ordinary income for the year of $35,000 before guaranteed payments to Phil.If Phil receives guaranteed payments of $25,000 during the tax year,what is the total income or loss that should be reported by Phil from the partnership for this tax year?

The "at-risk" rule applies,with limited exceptions,to all taxable activities.