Question 1

If a partner dies, his or her tax year closes

Accepted Answer

A)  on the date of death. 
B)  on the day after death. 
C)  on the day before death. 
D)  on some other date. 
A)  on the date of death. 
B)  on the day after death. 
C)  on the day before death. 
D)  on some other date. A

Question 2

The HMS Partnership, a cash method of accounting entity, has the following balance sheet at December 31 of last year:
     Sam, who has a one-third interest in profits, losses, and liabilities, sells his partnership interest to Beverly, for $77,000 cash on January 1 of this year. Sam's basis in his partnership interest (which, of course, includes a share of partnership liabilities) at the time of the sale was $17,000. In addition, Beverly assumes Sam's share of the partnership liabilities. What is the amount and character of the gain that Sam will recognize from this sale?

Accepted Answer

Amount realized = $77,000 + $10,000 liabilities assumed = $87,000.
Realized and recognized gain = $87,000 - $17,000 = $70,000.
The recognized gain is all ordinary income, since it equals his share of the unrealized receivables.

Question 3

Identify which of the following statements is true.

Accepted Answer

A)  When unrealized receivables are distributed in a liquidating distribution, the basis of the receivables will be increased. 
B)  The bases of unrealized receivables and inventory distributed by a partnership in liquidation of a partnership interest are never increased above their bases in the hands of the partnership. 
C)  The basis of the partnership interest is apportioned between all of the assets received in a liquidating distribution based on the relative FMVs of the assets. 
D)  All of the above are false. 
A)  When unrealized receivables are distributed in a liquidating distribution, the basis of the receivables will be increased. 
B)  The bases of unrealized receivables and inventory distributed by a partnership in liquidation of a partnership interest are never increased above their bases in the hands of the partnership. 
C)  The basis of the partnership interest is apportioned between all of the assets received in a liquidating distribution based on the relative FMVs of the assets. 
D)  All of the above are false. B

Question 4

Identify which of the following statements is true.

Accepted Answer

A)  If a partnership asset with a deferred precontribution gain is distributed in a nonliquidating distribution to the partner who contributed the asset, the precontribution gain must be recognized by the partner. 
B)  The partner's basis in the partnership interest is normally reduced by the FMV of property distributed in a nonliquidating distribution. 
C)  When a current distribution from a partnership reduces the basis of the partnership interest to zero, the partner's interest in the partnership is terminated. 
D)  All of the above are false. 
A)  If a partnership asset with a deferred precontribution gain is distributed in a nonliquidating distribution to the partner who contributed the asset, the precontribution gain must be recognized by the partner. 
B)  The partner's basis in the partnership interest is normally reduced by the FMV of property distributed in a nonliquidating distribution. 
C)  When a current distribution from a partnership reduces the basis of the partnership interest to zero, the partner's interest in the partnership is terminated. 
D)  All of the above are false.

Question 5

For tax purposes, a partner who receives retirement payments ceases to be regarded as a partner

Accepted Answer

A)  on the last day of the taxable year in which the partner retires. 
B)  on the last day of the month in which the partner retires. 
C)  on the day on which the partner retires. 
D)  only after the partner's last payment is received. 
A)  on the last day of the taxable year in which the partner retires. 
B)  on the last day of the month in which the partner retires. 
C)  on the day on which the partner retires. 
D)  only after the partner's last payment is received.

Question 6

The STU Partnership, an electing Large Partnership, has no passive activities and reports the following transactions for the year: net long-term capital losses $50,000, Sec. 1231 gain $60,000, ordinary income $20,000, charitable contributions $15,000, and tax-exempt income $2,000. How much will be reported as ordinary income to its partners?

Accepted Answer

A)  $5,000 
B)  $17,000 
C)  $20,000 
D)  $22,000 
A)  $5,000 
B)  $17,000 
C)  $20,000 
D)  $22,000

Question 7

What conditions are required for a partner to recognize a loss upon receipt of a distribution from a partnership?

Accepted Answer

A partner can recognize a loss on a dist

Question 8

Which of the following is a valid reason for making a 754 election?

Accepted Answer

A)  An incoming partner pays more for a partnership interest that his or her proportionate share of partnership assets. 
B)  Partners are able to increase their basis in the partnership interest upon the sale of a partnership interest. 
C)  Partnerships can increase, but not decrease, their basis in partnership assets. 
D)  A partnership can reduce its basis in assets upon cash distributions to partners. 
A)  An incoming partner pays more for a partnership interest that his or her proportionate share of partnership assets. 
B)  Partners are able to increase their basis in the partnership interest upon the sale of a partnership interest. 
C)  Partnerships can increase, but not decrease, their basis in partnership assets. 
D)  A partnership can reduce its basis in assets upon cash distributions to partners.

Question 9

Two years ago, Tom contributed investment land with a basis of $50,000 and an FMV of $62,000 to the RST Partnership. This year, Tom has a basis in his partnership interest of $53,000 when he receives a current distribution of $14,000 cash and inventory with a basis of $35,000 and an FMV of $52,000. (There is no Sec. 751 exchange in connection with the inventory distribution.) The partnership continues to hold the land Tom contributed. How much gain (if any) must Tom recognize as a result of this distribution?

Accepted Answer

Precontribution gain = $62,000 - $50,000

Question 10

Becky has a $24,000 basis in her partnership interest. She receives a current distribution of $4,000 cash, unrealized receivables with a basis of $12,000 and an FMV of $16,000, and land held as an investment with a basis of $3,000 and an FMV of $8,000. The partners' relative interests in the Sec. 751 assets do not change as a result of the current distribution. The basis of her partnership interest following the distribution is

Accepted Answer

A)  $5,000. 
B)  $1,000. 
C)  $0. 
D)  ($4,000). 
A)  $5,000. 
B)  $1,000. 
C)  $0. 
D)  ($4,000).

Question 11

Eicho's interest in the DPQ Partnership is terminated when her basis in the partnership is $70,000. She receives a liquidating distribution of $20,000 cash and inventory with a $24,000 basis and a $40,000 FMV. What is her gain or loss, and what is her basis in the inventory received?

Accepted Answer

She has a recognized loss of $

Question 12

Helmut contributed land with a basis of $5,000 and an FMV of $10,000 to the HG Partnership five years ago to acquire a 50% partnership interest. This year the land is distributed to another partner, Gail, when its FMV is $11,000. No other distributions have been made since Helmut became a partner. When the land is distributed to Gail, Helmut recognizes a gain of

Accepted Answer

A)  $0. 
B)  $2,500. 
C)  $3,000. 
D)  $5,000. 
A)  $0. 
B)  $2,500. 
C)  $3,000. 
D)  $5,000.

Question 13

Patrick purchased a one-third interest in the PPP partnership for $600,000. At the time of the purchase, the partnership had a 754 election in effect and its only asset was land with a basis of $1,500,000. This year, PPP sells the land for $1,800,000. What is Patrick's recognized share of the gain on the sale of the land?

Accepted Answer

A)  $0 
B)  $100,000 
C)  $300,000 
D)  none of the above 
A)  $0 
B)  $100,000 
C)  $300,000 
D)  none of the above

Question 14

Eicho's interest in the DPQ Partnership is terminated when her basis in the partnership is $70,000. She receives a liquidating distribution of $20,000 cash and inventory with a $24,000 basis and a $40,000 FMV. She also receives, as part of the distribution, a desk that has a $100 basis and a $200 FMV to the partnership. What is her gain or loss, and what is her basis in the items received?

Accepted Answer

She does not recognize any loss currentl

Question 15

Under Sec. 751, unrealized receivables include potential Section 1245 or 1250 recapture on the partnership's depreciable property.

Accepted Answer

A) True 
 B)False

Question 16

Under the check-the-box rules, an LLC with more than one member is taxed as a partnership unless it elects to be taxed as a corporation.

Accepted Answer

A) True 
 B)False

Question 17

What are some advantages and disadvantages of making a Section 754 election?

Accepted Answer

Advantages: Without a 754 election, if a

Question 18

Kenya sells her 20% partnership interest having a $28,000 basis to Ebony for $40,000 cash. At the time of the sale, the partnership has no liabilities and its assets are as follows:   Kenya and Ebony have no agreement concerning the allocation of the sales price. Ordinary income recognized by Kenya as a result of the sale is

Accepted Answer

A)  $6,000. 
B)  $12,000. 
C)  $14,000. 
D)  $16,000. 
A)  $6,000. 
B)  $12,000. 
C)  $14,000. 
D)  $16,000.

Question 19

A partner's holding period for a partnership interest is never considered when determining the holding period for property distributed in a liquidating distribution.

Accepted Answer

A) True 
 B)False

Question 20

Quinn and Pamela are equal partners in the QP Partnership. On December 30 of the current year, the QP Partnership agrees to liquidate Quinn's partnership interest for a cash payment on December 30 of each of the next five years. What tax issues should Quinn and Pamela consider with respect to the liquidation of Quinn's partnership interest?

Accepted Answer

• Does the partnership terminate for tax

If a partner dies, his or her tax year closes

Identify which of the following statements is true.

Identify which of the following statements is true.

For tax purposes, a partner who receives retirement payments ceases to be regarded as a partner

What conditions are required for a partner to recognize a loss upon receipt of a distribution from a partnership?

Which of the following is a valid reason for making a 754 election?

Eicho's interest in the DPQ Partnership is terminated when her basis in the partnership is $70,000. She receives a liquidating distribution of $20,000 cash and inventory with a $24,000 basis and a $40,000 FMV. What is her gain or loss, and what is her basis in the inventory received?

Under Sec. 751, unrealized receivables include potential Section 1245 or 1250 recapture on the partnership's depreciable property.

Under the check-the-box rules, an LLC with more than one member is taxed as a partnership unless it elects to be taxed as a corporation.

What are some advantages and disadvantages of making a Section 754 election?

A partner's holding period for a partnership interest is never considered when determining the holding period for property distributed in a liquidating distribution.

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters

Exam 10: Special Partnership Issues

If a partner dies, his or her tax year closes

Identify which of the following statements is true.

Identify which of the following statements is true.

For tax purposes, a partner who receives retirement payments ceases to be regarded as a partner

What conditions are required for a partner to recognize a loss upon receipt of a distribution from a partnership?

Which of the following is a valid reason for making a 754 election?

Eicho's interest in the DPQ Partnership is terminated when her basis in the partnership is $70,000. She receives a liquidating distribution of $20,000 cash and inventory with a $24,000 basis and a $40,000 FMV. What is her gain or loss, and what is her basis in the inventory received?

Under Sec. 751, unrealized receivables include potential Section 1245 or 1250 recapture on the partnership's depreciable property.

Under the check-the-box rules, an LLC with more than one member is taxed as a partnership unless it elects to be taxed as a corporation.

What are some advantages and disadvantages of making a Section 754 election?

A partner's holding period for a partnership interest is never considered when determining the holding period for property distributed in a liquidating distribution.

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters