Question 1

The partnership will make all of the elections affecting the computation of partnership income listed below except

Accepted Answer

A) the depreciation methods. 
B) the optional basis adjustments under Sec.754. 
C) the amortization method for organizational expenditures. 
D) the election of deduction or credit for foreign income taxes. 
A) the depreciation methods. 
B) the optional basis adjustments under Sec.754. 
C) the amortization method for organizational expenditures. 
D) the election of deduction or credit for foreign income taxes.

Question 2

Evie,a single taxpayer,is a 50% partner in a partnership.The partnership reports $100,000 of ordinary business income and no separately stated items in 2019.Evie also has $30,000 of taxable interest income and takes a $12,200 standard deduction.Evie will be allowed a qualified business income deduction of

Accepted Answer

A) $10,000. 
B) $20,000. 
C) $13,560. 
D) $50,000. 
A) $10,000. 
B) $20,000. 
C) $13,560. 
D) $50,000.

Question 3

Sari transferred an office building with a $500,000 FMV and a $300,000 adjusted basis to the Oak Partnership in exchange for a one-quarter ownership interest.Sari had acquired the building three years earlier and had used it in her sole proprietorship.Sari's holding period for her partnership interest

Accepted Answer

A) will begin the day after she acquires the partnership interest. 
B) will include the holding period of the transferred building. 
C) will depend on the election she files. 
D) none of the above. 
A) will begin the day after she acquires the partnership interest. 
B) will include the holding period of the transferred building. 
C) will depend on the election she files. 
D) none of the above.

Question 4

When property is contributed to a partnership,the partnership's basis in the property is the same as that of the transferor partner even if gain is recognized on the transfer.

Accepted Answer

A) True 
 B)False

Question 5

Duo Partnership reports the following items for the year: $$\begin{array} { | l | r | } 
\hline \text { Sales } & \$ 750,000 \
\hline \text { Wage expense } & 300,000 \
\hline \text { Rent expense } & 50,000 \
\hline \text { Charitable contributions } & 10,00 \
\hline \text { Short-term capital gain } & 20,000 \
\hline \text { Sec. } 179 \text { expense } & 100,00 \
\hline
\end{array}$$ In addition to reporting separately stated items on the Form 1065,Duo will report ordinary income of

Accepted Answer

A) $400,000. 
B) $300,000. 
C) $420,000. 
D) $310,000. 
A) $400,000. 
B) $300,000. 
C) $420,000. 
D) $310,000.

Question 6

Chen contributes a building worth $160,000 (adjusted basis $180,000)and $40,000 in services to a partnership for a partnership interest.Chen's basis in the partnership interest is

Accepted Answer

A) $160,000. 
B) $180,000. 
C) $200,000. 
D) $220,000. 
A) $160,000. 
B) $180,000. 
C) $200,000. 
D) $220,000.

Question 7

Many professional service partnerships have adopted the LLP form primarily because it

Accepted Answer

A) limits legal liability. 
B) limits the number of members. 
C) allows for the transfer of partners' interests. 
D) assures the continuity of life. 
A) limits legal liability. 
B) limits the number of members. 
C) allows for the transfer of partners' interests. 
D) assures the continuity of life.

Question 8

An S corporation recognizes gain or loss if it distributes property other than money to its shareholders.

Accepted Answer

A) True 
 B)False

Question 9

In the syndication of a partnership,brokerage and registration fees,printing fees,and legal fees of the underwriter total $50,000.With respect to these fees,the partnership must

Accepted Answer

A) capitalize the fees,which are not amortizable. 
B) deduct $5,000 of the expenses in the accounting period incurred and permanently capitalize the remainder. 
C) capitalize and amortize the fees over a period of not less than 60 months. 
D) deduct $5,000 of the expenses in the accounting period incurred and amortize the remaining amount over 180 months. 
A) capitalize the fees,which are not amortizable. 
B) deduct $5,000 of the expenses in the accounting period incurred and permanently capitalize the remainder. 
C) capitalize and amortize the fees over a period of not less than 60 months. 
D) deduct $5,000 of the expenses in the accounting period incurred and amortize the remaining amount over 180 months.

Question 10

Martha transferred property with a FMV of $60,000 (adjusted basis $30,000),which is subject to a $40,000 mortgage in exchange for a one-third interest in a partnership.The partnership has no other liabilities.The partners of MNO own the partnership equally.The partnership's basis in the property contributed is

Accepted Answer

A) $0. 
B) $40,000. 
C) $30,000. 
D) $60,000. 
A) $0. 
B) $40,000. 
C) $30,000. 
D) $60,000.

Question 11

An S corporation may not have more than 75 shareholders.

Accepted Answer

A) True 
 B)False

Question 12

The income of a single member LLC is taxed to its owner under the sole proprietorship rules if no election to be taxed as a corporation is made.

Accepted Answer

A) True 
 B)False

Question 13

Empire Corporation has operated as a C corporation for its first three years of existence because one of its shareholders disqualified it from electing S corporation status.That shareholder is now gone,and the remaining shareholders have elected S corporation status effective for the current year.Empire Corporation has one highly appreciated asset that it hopes to sell in the near future.How many years must elapse before the sale in order to avoid the built-in gains tax?

Accepted Answer

A) 3 years 
B) 5 years 
C) 7 years 
D) 10 years 
A) 3 years 
B) 5 years 
C) 7 years 
D) 10 years

Question 14

All of the following are separately stated items that pass through from the partnership to the partners except

Accepted Answer

A) 1231 gains or losses. 
B) charitable contributions. 
C) capital gains and losses. 
D) 1245 and 1250 recapture. 
A) 1231 gains or losses. 
B) charitable contributions. 
C) capital gains and losses. 
D) 1245 and 1250 recapture.

Question 15

Jamahl has a 65% interest in a partnership.Jamahl sells land to the partnership for $70,000.Prior to the sale,the land had a FMV of $70,000 and an adjusted basis of $90,000 to Jamahl.Due to the sale,Jamahl will recognize

Accepted Answer

A) a gain of $20,000. 
B) a loss of $20,000. 
C) $0,but he will have a carryover loss of $20,000. 
D) $0,and he will not have any carryover loss. 
A) a gain of $20,000. 
B) a loss of $20,000. 
C) $0,but he will have a carryover loss of $20,000. 
D) $0,and he will not have any carryover loss.

Question 16

All of the following are requirements to qualify as an S corporation with the exception of

Accepted Answer

A) the corporation must be a domestic corporation. 
B) the corporation may issue only one class of stock (disregarding voting rights). 
C) the corporation may not have more than 100 shareholders. 
D) the corporation shareholders may consist of only individuals,estates,trusts,and partnerships. 
A) the corporation must be a domestic corporation. 
B) the corporation may issue only one class of stock (disregarding voting rights). 
C) the corporation may not have more than 100 shareholders. 
D) the corporation shareholders may consist of only individuals,estates,trusts,and partnerships.

Question 17

Under the "check-the-box" Treasury Regulations,an LLC with more than one member is treated as a partnership unless the LLC affirmatively elects to be classified as a corporation.

Accepted Answer

A) True 
 B)False

Question 18

On April 5,2019,Joan contributes business equipment (she had purchased on October 24,2017)having a $45,000 FMV and a $40,000 adjusted basis to the EJK Partnership in exchange for a 25% interest in the capital and profits.The basis of the property and the date the holding period begins for the partnership is

Accepted Answer

A)  $$\begin{array} {| l | l | } 
\hline \text { Basis } & \text { Holding Period Begins } \
\hline \$ 40,000 & \text { October } 24,2017 \
\hline
\end{array}$$ 
B)  $$\begin{array} {| l | l |} 
\hline\text { Basis } & \text { Holding Period Begins } \
\hline \$ 40,000 & \text { April 5, 2019 }\\hline
\end{array}$$ 
C)  $$\begin{array} { |l | l | } 
\hline \text { Basis } & \text { Holding Period Begins } \
\hline \$ 45,000 & \text { October } 24,2017 \
\hline
\end{array}$$ 
D)  $$\begin{array} {| l | l | } 
\hline \text { Basis } & \text { Holding Period Begins } \
\hline \$ 45,000 & \text { April 5, 2019 } \
\hline
\end{array}$$ 
A)  $$\begin{array} {| l | l | } 
\hline \text { Basis } & \text { Holding Period Begins } \
\hline \$ 40,000 & \text { October } 24,2017 \
\hline
\end{array}$$ 
B)  $$\begin{array} {| l | l |} 
\hline\text { Basis } & \text { Holding Period Begins } \
\hline \$ 40,000 & \text { April 5, 2019 }\\hline
\end{array}$$ 
C)  $$\begin{array} { |l | l | } 
\hline \text { Basis } & \text { Holding Period Begins } \
\hline \$ 45,000 & \text { October } 24,2017 \
\hline
\end{array}$$ 
D)  $$\begin{array} {| l | l | } 
\hline \text { Basis } & \text { Holding Period Begins } \
\hline \$ 45,000 & \text { April 5, 2019 } \
\hline
\end{array}$$

Question 19

Joy is a material participant in a partnership.Her basis in her partnership interest is $150,000.Due to a major expansion,the partnership will generate a significant loss this year,and Joy's share is expected to be $200,000.The partners expect the partnership to report a large profit next year.Joy is in the top tax bracket this year,and she expects to be in a lower tax bracket next year.Due to her higher marginal tax rate this year,Joy would like to deduct her full share of the partnership loss this year.What strategies can she employ before year-end to assure full deduction of this year's loss?

Accepted Answer

A) As a material participant,Joy will be entitled to deduct her full share of the partnership loss this year. 
B) Joy can make a loan to the partnership before year-end. 
C) Joy can contribute capital to the partnership before year-end. 
D) Either Response B or Response C will allow Joy to deduct her full share of the loss. 
A) As a material participant,Joy will be entitled to deduct her full share of the partnership loss this year. 
B) Joy can make a loan to the partnership before year-end. 
C) Joy can contribute capital to the partnership before year-end. 
D) Either Response B or Response C will allow Joy to deduct her full share of the loss.

Question 20

The expenses associated with promoting and marketing partnership interests can be currently deducted if $5,000 or less.Expenses in excess of $5,000 are amortized over 180 months.

Accepted Answer

A) True 
 B)False

Exam 33: Partnerships and S Corporations

The partnership will make all of the elections affecting the computation of partnership income listed below except

When property is contributed to a partnership,the partnership's basis in the property is the same as that of the transferor partner even if gain is recognized on the transfer.

Chen contributes a building worth $160,000 (adjusted basis $180,000)and $40,000 in services to a partnership for a partnership interest.Chen's basis in the partnership interest is

Many professional service partnerships have adopted the LLP form primarily because it

An S corporation recognizes gain or loss if it distributes property other than money to its shareholders.

In the syndication of a partnership,brokerage and registration fees,printing fees,and legal fees of the underwriter total $50,000.With respect to these fees,the partnership must

An S corporation may not have more than 75 shareholders.

The income of a single member LLC is taxed to its owner under the sole proprietorship rules if no election to be taxed as a corporation is made.

All of the following are separately stated items that pass through from the partnership to the partners except

Jamahl has a 65% interest in a partnership.Jamahl sells land to the partnership for $70,000.Prior to the sale,the land had a FMV of $70,000 and an adjusted basis of $90,000 to Jamahl.Due to the sale,Jamahl will recognize

All of the following are requirements to qualify as an S corporation with the exception of

Under the "check-the-box" Treasury Regulations,an LLC with more than one member is treated as a partnership unless the LLC affirmatively elects to be classified as a corporation.

The expenses associated with promoting and marketing partnership interests can be currently deducted if $5,000 or less.Expenses in excess of $5,000 are amortized over 180 months.

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

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

U.S. Taxation of Foreign-Related Transactions

an Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Business Expenses and Deferred Compensation

Itemized Deductions

Losses and Bad Debts

Depreciation,cost Recovery,amortization,and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Sec1231 and Recapture

Special Tax Computation Methods,tax Credits,and Payment of Tax

Tax Research

Corporations

Taxes and Investment Planning

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