Exam 9: Partnership Formation and Operation

Meg and Abby are equal partners in the AM Partnership,which earns $40,000 ordinary income,$6,000 long-term capital gain (LTCG),and $2,000 Sec.1231 loss during the current year.What is the amount and character of income that must be reported on Abby's tax return for this year's partnership operations?

When determining the guaranteed payment,which of the following statements is correct?

On the first day of the partnership's tax year,Karen purchases a 50% interest in a general partnership for $30,000 cash and she materially participates in the operation of the partnership for the entire year.The partnership has $40,000 in recourse liabilities when Karen enters the partnership.Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses.There is no minimum gain related to the nonrecourse liability.During the year,the partnership incurs a $120,000 loss and a $20,000 increase in liabilities.How much of the loss can Karen report on her tax return for the current year?

For a 20% interest in partnership capital,profits,and losses,Kasi contributes a machine having a basis of $30,000 and an FMV of $40,000.The partnership also assumes a $24,000 recourse liability secured by the machine.The partnership has $6,000 in recourse liabilities immediately preceding Kasi's contributions.Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses.Kasi's basis in the partnership interest is

On December 1,Antonio,a member of a three-person partnership,purchases investment securities from the partnership for their $37,000 FMV.All partners share profits and losses equally.The securities were acquired by the partnership for $25,000 cash in March of the current year.What amount and character of gain will Antonio recognize because of this transaction?

Jangyoun sells investment land having a $30,000 basis to a partnership in which he has a 60% partnership interest.The partnership pays $26,000 (FMV)for the land.Later,the partnership sells the investment land to a nonpartner for $31,000.On the sale of the land,the partnership must recognize a

Identify which of the following statements is true.

David contributes investment land with a basis of $24,000 and an FMV of $40,000 to a partnership for a 10% interest in partnership capital,profits,and losses.The land is subject to a $30,000 recourse liability,which is assumed by the partnership.The partnership has other recourse liabilities of $18,000.Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses.David must recognize a

Latoya owns a 10% interest in the ABC Partnership from January 1 through June 30 (the 181st day of the tax year)of the current year (a non-leap year).On July 1,Latoya buys an additional 10% interest in the partnership.The XYZ Partnership's ordinary income is $109,500 and it is earned evenly throughout the year.Latoya's distributive share of the ordinary income is

On December 31 of last year,Alex and Jackson become equal partners in the AJ Partnership with assets having a tax basis and FMV of $120,000.The partnership,which deals in securities,had no liabilities at the end of last year.In January of this year,Franklin contributes his investment securities with an FMV of $60,000 (purchased two years ago at a cost of $45,000)to become an equal partner in the new AJF Partnership.The securities,which are inventory to the partnership,are sold on December 15 of the current year for $90,000.What amount and character of gain from the sale of these securities should be allocated to Franklin?

Formation of a partnership requires legal documentation filed with the Secretary of State.

When computing the partnership's ordinary income,a deduction is allowed for

Yee manages Huang real estate,a partnership in which she is also a partner.She receives 40% of all partnership income before guaranteed payments,but no less than $80,000 per year.In the current year,the partnership reports $400,000 in ordinary income.What is Yee's distributive share and her guaranteed payment?

A partnership has one general partner,Allen,who materially participates in the business.Allen had a $30,000 distributive share of ordinary losses for this year and the partnership had no separately stated gains or losses.There are no changes in liabilities during this year and there are no additional contributions or distributions.At the beginning of this year,the Sec.705 basis was $40,000 and the at-risk basis was $15,000.The basis on December 31 of this year based on the above information is

William and Irene each contributed $20,000 cash to the WI Partnership on January 1 of last year.William and Irene share profits and losses equally.Last year,the partnership reported tax-exempt interest income of $4,000.This year,each partner receives $1,000 of the tax-exempt interest income in a cash distribution.There are no partnership liabilities and no other income,loss,contributions,or distributions during both years.William's basis in the partnership interest following these transactions is

Brent is a general partner in BC Partnership.His distributive share of partnership income and his guaranteed payment for the year are as follows: Ordinary income \ 30,000 Short-term capital gain \ 18,000 Guaranteed payment \ 36,000 What is his self-employment income?

Rashad contributes a machine having a basis of $30,000 and an FMV of $25,000 to a partnership in exchange for a 20% interest in partnership capital,profits,and losses.Prior to the contribution,the partnership had recourse liabilities of $20,000.The partnership assumes a $20,000 recourse liability that is owed by Rashad on the machine.Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses.Rashad's basis in his partnership interest is

Identify which of the following statements is true.

Limited partners must consider the at-risk,basis,and passive loss limitations when determining the amount of their deductible loss.

Identify which of the following statements is true.