Question 1

All costs of organizing a partnership can be deducted in the year in which the partnership begins business.

Accepted Answer

A) True 
 B)False

Question 2

Emma contributes property having a $24,000 FMV and a $15,000 adjusted basis and also renders legal services valued at $22,000 in exchange for a 30% interest in the capital and profits of the ABC partnership.The tax results to Emma will be

Accepted Answer

A) no income is recognized and a partnership basis of $37,000. 
B) ordinary income of $22,000 and a partnership basis of $37,000. 
C) ordinary income of $22,000 and a partnership basis of $46,000. 
D) no income is recognized and a partnership basis of $46,000. 
A) no income is recognized and a partnership basis of $37,000. 
B) ordinary income of $22,000 and a partnership basis of $37,000. 
C) ordinary income of $22,000 and a partnership basis of $46,000. 
D) no income is recognized and a partnership basis of $46,000.

Question 3

Ordinary losses and separately stated deduction and loss items that exceed a partner's basis carry over indefinitely until the partner has a positive partnership basis.

Accepted Answer

A) True 
 B)False

Question 4

S corporation shareholders who own more than 2% of the outstanding stock are eligible for which of the following tax-free benefits?

Accepted Answer

A) group term life insurance exclusion under Sec.79 for premiums paid for up to $50,000 coverage 
B) exclusion for cafeteria plan benefits 
C) exclusion from income for premiums paid for accident and health and medical reimbursement plans 
D) none of the above 
A) group term life insurance exclusion under Sec.79 for premiums paid for up to $50,000 coverage 
B) exclusion for cafeteria plan benefits 
C) exclusion from income for premiums paid for accident and health and medical reimbursement plans 
D) none of the above

Question 5

All of the following statements are true regarding nonliquidating distributions of a partnership except

Accepted Answer

A) if money is distributed in excess of the partnership interest,the partner receiving the distribution has capital gain. 
B) in no circumstances will the partner or the partnership recognize gain or loss from a nonliquidating distribution. 
C) in no circumstances may the partner's basis in the partnership interest be reduced below zero as a result of a nonliquidating distribution. 
D) if,after money distributions reduce the partnership basis,the adjusted basis of distributed property does not exceed the partner's basis in the partnership interest,the basis of the distributed property carries over to the partner. 
A) if money is distributed in excess of the partnership interest,the partner receiving the distribution has capital gain. 
B) in no circumstances will the partner or the partnership recognize gain or loss from a nonliquidating distribution. 
C) in no circumstances may the partner's basis in the partnership interest be reduced below zero as a result of a nonliquidating distribution. 
D) if,after money distributions reduce the partnership basis,the adjusted basis of distributed property does not exceed the partner's basis in the partnership interest,the basis of the distributed property carries over to the partner.

Question 6

At the beginning of this year,Edmond and Samuel were equal partners in a partnership that uses the calendar year as its tax year.On October 1,this year,Joan contributed $48,000 cash for a one-third interest in the partnership.The interests of both Edmond and Samuel drop to one-third.The partnership reports a $36,000 ordinary loss for the current tax year ending December 31.The loss allocation to Samuel is (assume the elective proration method with a monthly convention)

Accepted Answer

A) $12,000. 
B) $13,500. 
C) $16,500. 
D) $18,000. 
A) $12,000. 
B) $13,500. 
C) $16,500. 
D) $18,000.

Question 7

Mia is a 50% partner in a partnership with a beginning of the year adjusted basis in her partnership interest of $50,000.For the current year,no distributions are made to partners,and there is no change in partnership liabilities.The partnership incurred a $140,000 ordinary loss for the year.How does Mia treat her loss in excess of basis?

Accepted Answer

A) She will recognize $3,000 this year and carry forward the balance. 
B) She will first carry back the excess loss for two years and then carry forward the balance up to 20 years. 
C) She will carry over the excess loss indefinitely until a subsequent year when she again has a positive basis in her partnership interest. 
D) She will first carry back the excess loss three years and then carry forward the balance up to five years. 
A) She will recognize $3,000 this year and carry forward the balance. 
B) She will first carry back the excess loss for two years and then carry forward the balance up to 20 years. 
C) She will carry over the excess loss indefinitely until a subsequent year when she again has a positive basis in her partnership interest. 
D) She will first carry back the excess loss three years and then carry forward the balance up to five years.

Question 8

When capital or Sec.1231 assets are transferred to a partnership in exchange for a partnership interest qualifying under Sec.721,the holding period for the partnership interest includes the holding period of the contributed property.

Accepted Answer

A) True 
 B)False

Question 9

George transferred land having a $170,000 FMV and a $60,000 adjusted basis,which is subject to a $150,000 mortgage in exchange for a one-third interest in the GEF Partnership.The partnership owes no other liabilities.George,Elena,and Franz share profits and losses equally and each has a one-third interest in partnership capital.The basis to the partnership of the land transferred by George is

Accepted Answer

A) $20,000. 
B) $60,000. 
C) $110,000. 
D) $170,000. 
A) $20,000. 
B) $60,000. 
C) $110,000. 
D) $170,000.

Question 10

A partnership's liabilities have increased by year-end.As a result,partners' bases in their partnership interests will increase.

Accepted Answer

A) True 
 B)False

Question 11

Lance transferred land having a $180,000 FMV and a $105,000 adjusted basis,which is subject to a $150,000 mortgage in exchange for a one-third interest in the Trois Partnership.Lance acquired the land in 2010.The partnership owes no other liabilities.Lance,Rhonda,and Zach share profits and losses equally and each has a one-third interest in partnership capital.The tax effect to Lance is

Accepted Answer

A) no gain or loss recognized. 
B) recognized gain of $45,000 on the transfer. 
C) recognized gain of $75,000 on the transfer. 
D) recognized loss of $45,000 on the transfer. 
A) no gain or loss recognized. 
B) recognized gain of $45,000 on the transfer. 
C) recognized gain of $75,000 on the transfer. 
D) recognized loss of $45,000 on the transfer.

Question 12

If partners having a majority interest in the partnership do not have the same tax year,the partnership uses the same tax year as all of its principal partners.Principal partners are those with 10% or greater interest in the partnership.

Accepted Answer

A) True 
 B)False

Question 13

Tess buys Harry's partnership interest in Oval Partnership.Oval holds several highly appreciated assets,and this appreciation is reflected in the price Tess paid for the partnership interest.Tess can make a Sec.754 election to increase the basis of her share of partnership assets.

Accepted Answer

A) True 
 B)False

Question 14

Atiqa receives a nonliquidating distribution of land from her partnership.The partnership purchased the land five years ago for $20,000.At the time of the distribution,it is worth $28,000.Prior to the distribution,Atiqa's basis in her partnership interest is $37,000.Atiqa's basis in the distributed land and her post-distribution basis in her partnership interest are

Accepted Answer

A)  $$\begin{array} {| l | l | } 
\hline \text { Land } & \text { Partnership Interest } \
\hline \$ 28,000 & \$ 9,000\\hline
\end{array}$$ 
B)  $$\begin{array} {| l | l | } 
\hline \text { Land } & \text { Partnership Interest } \
\hline \$ 28,000 & \$ 17,000\\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Land } & \text { Partnership Interest } \
\hline \$ 20,000 & \$ 9,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | } 
\hline \text { Land } & \text { Partnership Interest } \
\hline \$ 20,000 & \$ 17,000 \
\hline
\end{array}$$ 
A)  $$\begin{array} {| l | l | } 
\hline \text { Land } & \text { Partnership Interest } \
\hline \$ 28,000 & \$ 9,000\\hline
\end{array}$$ 
B)  $$\begin{array} {| l | l | } 
\hline \text { Land } & \text { Partnership Interest } \
\hline \$ 28,000 & \$ 17,000\\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Land } & \text { Partnership Interest } \
\hline \$ 20,000 & \$ 9,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | } 
\hline \text { Land } & \text { Partnership Interest } \
\hline \$ 20,000 & \$ 17,000 \
\hline
\end{array}$$

Question 15

Adam Corporation,an S corporation,owns 100% of the stock of a C corporation and 100% of the stock of another S corporation that qualifies as an electing QSUB.In preparing its tax return,Adam Corporation

Accepted Answer

A) will include the income,deductions and credits of the C corporation. 
B) will include the income,deductions and credits of the QSUB. 
C) will include the income,deductions and credits of the C corporation and the QSUB. 
D) will not include the income,deductions and credits of the C corporation or the QSUB. 
A) will include the income,deductions and credits of the C corporation. 
B) will include the income,deductions and credits of the QSUB. 
C) will include the income,deductions and credits of the C corporation and the QSUB. 
D) will not include the income,deductions and credits of the C corporation or the QSUB.

Question 16

A liquidating distribution is treated as a sale or exchange of a partnership interest.

Accepted Answer

A) True 
 B)False

Question 17

Raina owns 100% of Tribo Inc.,an S corporation.She started the business this year with a $100,000 capital contribution.In addition,the business borrowed $50,000 from the bank which she had to guarantee.Tribo incurred a first year operating loss of $170,000.Raina will deduct an ordinary loss this year of

Accepted Answer

A) $170,000. 
B) $100,000. 
C) $150,000. 
D) $0. 
A) $170,000. 
B) $100,000. 
C) $150,000. 
D) $0.

Question 18

Iris and Jeong file a joint return.Iris is an executive with a corporation,earning a $800,000 salary.Jeong is a 50% partner in JK Partnership.He works full-time in the partnership.Jeong's basis in his partnership interest at the beginning of the year is $1 million.In the current year,the partnership reports an ordinary loss of $1.2 million,half of which is allocated to Jeong.There were no separately stated items,no distributions made and no changes in liabilities.Iris and Jeong earned $100,000 of dividend income from their investment portfolio.They do not itemize deductions.
a.Determine 2019 taxable income for Iris and Jeong.
b.Discuss the treatment of any income or loss items not recognized in 2019.

Accepted Answer

@#IMG-DLM& * Jeong has satisfied the basis limitat

Question 19

All of the following would reduce the basis of a shareholder's stock in an S corporation,except

Accepted Answer

A) a shareholder's pro rata share of nontaxable distributions by the S corporation to its shareholders. 
B) a shareholder's share of all loss and deduction items of the S corporation that are separately stated and passed through to the shareholder. 
C) a shareholder's pro rata share of any nondeductible expenses of the S corporation. 
D) a shareholder's pro rata share of loan repayments made by the S corporation. 
A) a shareholder's pro rata share of nontaxable distributions by the S corporation to its shareholders. 
B) a shareholder's share of all loss and deduction items of the S corporation that are separately stated and passed through to the shareholder. 
C) a shareholder's pro rata share of any nondeductible expenses of the S corporation. 
D) a shareholder's pro rata share of loan repayments made by the S corporation.

Question 20

MN Partnership has two equal partners,Mark and Nadia.In the current year,the MN earns $140,000 of ordinary business income and a $30,000 long-term capital gain.Nadia is single.In addition to the partnership items,she reports $40,000 of interest income and a long-term capital loss of $13,000 from her personal investment accounts.Nadia does not itemize her deductions.Calculate Nadia's 2019 taxable income.

Accepted Answer

@#IMG-DLM& Combined QBI is $14,000 ($70,000 × 20%)

Exam 33: Partnerships and S Corporations

All costs of organizing a partnership can be deducted in the year in which the partnership begins business.

Emma contributes property having a $24,000 FMV and a $15,000 adjusted basis and also renders legal services valued at $22,000 in exchange for a 30% interest in the capital and profits of the ABC partnership.The tax results to Emma will be

Ordinary losses and separately stated deduction and loss items that exceed a partner's basis carry over indefinitely until the partner has a positive partnership basis.

S corporation shareholders who own more than 2% of the outstanding stock are eligible for which of the following tax-free benefits?

All of the following statements are true regarding nonliquidating distributions of a partnership except

When capital or Sec.1231 assets are transferred to a partnership in exchange for a partnership interest qualifying under Sec.721,the holding period for the partnership interest includes the holding period of the contributed property.

A partnership's liabilities have increased by year-end.As a result,partners' bases in their partnership interests will increase.

If partners having a majority interest in the partnership do not have the same tax year,the partnership uses the same tax year as all of its principal partners.Principal partners are those with 10% or greater interest in the partnership.

Tess buys Harry's partnership interest in Oval Partnership.Oval holds several highly appreciated assets,and this appreciation is reflected in the price Tess paid for the partnership interest.Tess can make a Sec.754 election to increase the basis of her share of partnership assets.

Adam Corporation,an S corporation,owns 100% of the stock of a C corporation and 100% of the stock of another S corporation that qualifies as an electing QSUB.In preparing its tax return,Adam Corporation

A liquidating distribution is treated as a sale or exchange of a partnership interest.

All of the following would reduce the basis of a shareholder's stock in an S corporation,except

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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