Question 1

Identify which of the following statements is true.

Accepted Answer

A) A partner's relief of debt is treated as if the partner receives a cash distribution. 
B) When a partnership assumes any liabilities of the transferor,the transferor has an increase in the basis of his or her partnership interest. 
C) Gain recognized by a contributing partner because of the assumption of liabilities by the partnership increases the partnership's basis in the contributed property. 
D) All of the above are false. 
A) A partner's relief of debt is treated as if the partner receives a cash distribution. 
B) When a partnership assumes any liabilities of the transferor,the transferor has an increase in the basis of his or her partnership interest. 
C) Gain recognized by a contributing partner because of the assumption of liabilities by the partnership increases the partnership's basis in the contributed property. 
D) All of the above are false.

Question 2

Bob,Kara,and Mark are partners in the BKM Partnership.Bob is a 40% partner and has a June 30 tax year-end.Kara owns a 40% interest in the partnership and has a September 30 tax year-end,and Mark owns the remaining 20% interest and has an October 31 tax year-end.The partnership does not have a natural business year.What is the required tax year-end for the partnership (if no Sec.444 election is made)?

Accepted Answer

A) June 30 
B) September 30 
C) October 31 
D) December 31 
A) June 30 
B) September 30 
C) October 31 
D) December 31

Question 3

Karl arranges financing for a limited partnership to purchase real estate in exchange for a 50% interest in partnership profits.Two weeks later,Karl sells the profits interest for $30,000.In this tax year,Karl must recognize

Accepted Answer

A) no gain or loss. 
B) a $30,000 short-term capital gain. 
C) a $30,000 ordinary income. 
D) a $30,000 Sec.1231 gain. 
A) no gain or loss. 
B) a $30,000 short-term capital gain. 
C) a $30,000 ordinary income. 
D) a $30,000 Sec.1231 gain.

Question 4

Bao had investment land that he purchased in 1990 for $80,000.Two years ago,when the land was contributed to a partnership,the FMV was $50,000.The land is inventory in the hands of the partnership.The partnership then sells the land in the current year for $46,000.The partnership's recognized loss is

Accepted Answer

A) a $34,000 capital loss. 
B) a $34,000 ordinary loss. 
C) a $30,000 capital loss and a $4,000 ordinary loss. 
D) a $4,000 capital loss and a $30,000 ordinary loss. 
A) a $34,000 capital loss. 
B) a $34,000 ordinary loss. 
C) a $30,000 capital loss and a $4,000 ordinary loss. 
D) a $4,000 capital loss and a $30,000 ordinary loss.

Question 5

David purchased a 10% capital and profits interest in a partnership this year.He does not participate in the partnership's business.David has no passive income in the current year.His distributive share of the partnership's loss is $40,000 for this year.David's Sec.705 basis in the partnership is $32,000 and his at-risk basis is $16,000 at the end of the current year.How much of the loss can David deduct on his tax return?

Accepted Answer

A) $0 
B) $16,000 
C) $32,000 
D) $40,000 
A) $0 
B) $16,000 
C) $32,000 
D) $40,000

Question 6

Electing large partnership rules differ from other partnership rules in all of the following areas except

Accepted Answer

A) partnership income reporting. 
B) partnership termination. 
C) partnership audits. 
D) All of the above are large partnership rule differences. 
A) partnership income reporting. 
B) partnership termination. 
C) partnership audits. 
D) All of the above are large partnership rule differences.

Question 7

In computing the ordinary income of a partnership,a deduction is allowed for

Accepted Answer

A) net Sec.1231 losses. 
B) bad debts. 
C) foreign income taxes paid. 
D) charitable contributions. 
A) net Sec.1231 losses. 
B) bad debts. 
C) foreign income taxes paid. 
D) charitable contributions.

Question 8

Yong contributes a machine having an adjusted basis of $20,000 and an FMV of $25,000 for a 10% partnership interest.Yong had taken $10,000 of depreciation prior to the contribution.The partnership has no liabilities.As a result of the contribution,Yong must recognize

Accepted Answer

A) no gain or loss. 
B) a $5,000 Sec.1245 gain. 
C) a $5,000 capital gain. 
D) $10,000 ordinary income. 
A) no gain or loss. 
B) a $5,000 Sec.1245 gain. 
C) a $5,000 capital gain. 
D) $10,000 ordinary income.

Question 9

At the formation of the BD Partnership,Betty contributes land with a basis of $10,000 and an FMV of $30,000 and Dick contributes cash of $30,000.Betty and Dick share profits and losses equally.When the land is sold two years later for $50,000,Betty must recognize a gain of

Accepted Answer

A) $10,000. 
B) $20,000. 
C) $30,000. 
D) $40,000. 
A) $10,000. 
B) $20,000. 
C) $30,000. 
D) $40,000.

Question 10

Identify which of the following statements is true.

Accepted Answer

A) Distribution of partnership income in the form of cash to partners is generally tax-free to the partners and the partnership. 
B) When partners receive cash distributions from the partnership,they pay taxes on those distributions. 
C) If money distributions exceed the partner's basis in the partnership interest,the partner would have to recognize gain on the distribution from the partnership.Such gain is usually an ordinary gain. 
D) All of the above are true. 
A) Distribution of partnership income in the form of cash to partners is generally tax-free to the partners and the partnership. 
B) When partners receive cash distributions from the partnership,they pay taxes on those distributions. 
C) If money distributions exceed the partner's basis in the partnership interest,the partner would have to recognize gain on the distribution from the partnership.Such gain is usually an ordinary gain. 
D) All of the above are true.

Question 11

A partner's basis for his partnership interest can be negative.

Accepted Answer

A) True 
 B)False

Question 12

A partnership must file Form 1065 only if its income exceeds $1,000.

Accepted Answer

A) True 
 B)False

Question 13

Identify which of the following statements is true.

Accepted Answer

A) A general partner's share of recourse debt is based on his or her economic risk of loss,and his or her share of nonrecourse debt is predominantly based on his or her share of partnership profits. 
B) A partner's basis for his or her partnership interest is increased by his or her share of the partnership's tax-exempt income. 
C) If all tax-exempt interest income is distributed when received by a partnership,the partners' bases are the same after the distribution as they were before the tax-exempt interest was received by the partnership. 
D) All of the above are true. 
A) A general partner's share of recourse debt is based on his or her economic risk of loss,and his or her share of nonrecourse debt is predominantly based on his or her share of partnership profits. 
B) A partner's basis for his or her partnership interest is increased by his or her share of the partnership's tax-exempt income. 
C) If all tax-exempt interest income is distributed when received by a partnership,the partners' bases are the same after the distribution as they were before the tax-exempt interest was received by the partnership. 
D) All of the above are true.

Question 14

The XYZ Partnership reports the following operating results for the current year: $$\begin{array} { | l | r | } 
\hline \text { Net long-term capital loss } & ( \$ 40,000 ) \
\hline \text { Net Sec. 1231 loss } & ( 16,000 ) \
\hline \text { Ordinary income } & 50,000 \
\hline
\end{array}$$ Tai has a 20% profits interest and a 25% loss interest in the XYZ Partnership.His distributive share of ordinary income is

Accepted Answer

A) $6,800. 
B) $8,500. 
C) $10,000. 
D) $12,500. 
A) $6,800. 
B) $8,500. 
C) $10,000. 
D) $12,500.

Question 15

On January 2 of the current year,Calloway and Taylor contribute cash equally to form the CT Partnership.Calloway and Taylor share profits and losses in a ratio of 75% and 25%,respectively.The partnership's ordinary income for the year was $40,000.Calloway received a distribution of $5,000 during the year.What is Calloway's share of taxable income for the year?

Accepted Answer

A) $5,000 
B) $10,000 
C) $20,000 
D) $30,000 
A) $5,000 
B) $10,000 
C) $20,000 
D) $30,000

Question 16

Which of the following is false?

Accepted Answer

A) A large partnership must not be a service partnership. 
B) A large partnership must have fewer than 100 partners. 
C) A large partnership must not be engaged in commodity trading. 
D) A large partnership is subject to a different system of audits. 
A) A large partnership must not be a service partnership. 
B) A large partnership must have fewer than 100 partners. 
C) A large partnership must not be engaged in commodity trading. 
D) A large partnership is subject to a different system of audits.

Question 17

Miguel has a 50% interest in partnership capital,profits,and losses.The basis for his partnership interest is $50,000.The partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses.Miguel receives a distribution of land that has an FMV of $40,000 and an adjusted basis of $30,000.The land is subject to a $15,000 liability,which Miguel assumes.His basis in the partnership interest following the land distribution is

Accepted Answer

A) $12,500. 
B) $20,000. 
C) $27,500. 
D) $35,000. 
A) $12,500. 
B) $20,000. 
C) $27,500. 
D) $35,000.

Question 18

Identify which of the following statements is true.

Accepted Answer

A) All of the partners in a limited partnership have limited liability. 
B) A limited partnership must have at least two general partners. 
C) A limited partnership cannot have a corporate general partner. 
D) All of the above are false. 
A) All of the partners in a limited partnership have limited liability. 
B) A limited partnership must have at least two general partners. 
C) A limited partnership cannot have a corporate general partner. 
D) All of the above are false.

Question 19

Identify which of the following statements is false.

Accepted Answer

A) Jean and Blossom form an equal partnership.Jean contributes $10,000 cash and Blossom contributes property with a $10,000 FMV and a $5,000 basis.When the partnership sells the property contributed by Blossom for $10,000 shortly after the formation,Blossom must include the $5,000 gain in her income. 
B) In order to shift income/loss between partners,there must be substantial economic effect. 
C) The BB Partnership wants to make a special allocation of $10,000 of long-term capital gain to Bob and a special allocation of $10,000 of ordinary income to Briana.This allocation will have a substantial economic effect. 
D) Partners must make up negative balances in their capital accounts upon liquidation of the partnership. 
A) Jean and Blossom form an equal partnership.Jean contributes $10,000 cash and Blossom contributes property with a $10,000 FMV and a $5,000 basis.When the partnership sells the property contributed by Blossom for $10,000 shortly after the formation,Blossom must include the $5,000 gain in her income. 
B) In order to shift income/loss between partners,there must be substantial economic effect. 
C) The BB Partnership wants to make a special allocation of $10,000 of long-term capital gain to Bob and a special allocation of $10,000 of ordinary income to Briana.This allocation will have a substantial economic effect. 
D) Partners must make up negative balances in their capital accounts upon liquidation of the partnership.

Question 20

For a 30% interest in partnership capital,profits,and losses,Carol contributes a machine with a basis of $40,000 and an FMV of $80,000.The partnership assumes a $70,000 recourse liability on the machine.At the time of the contribution,the partnership had recourse liabilities of $10,000.Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses.Following the contribution,Carol has

Accepted Answer

A) a capital loss due to the contribution of $6,000 and a zero basis in the partnership interest. 
B) a capital gain due to the contribution of $6,000 and a zero basis in the partnership interest. 
C) a $34,000 basis in the partnership interest and no gain or loss. 
D) a $43,000 basis in the partnership interest and no gain or loss. 
A) a capital loss due to the contribution of $6,000 and a zero basis in the partnership interest. 
B) a capital gain due to the contribution of $6,000 and a zero basis in the partnership interest. 
C) a $34,000 basis in the partnership interest and no gain or loss. 
D) a $43,000 basis in the partnership interest and no gain or loss.

Exam 9: Partnership Formation and Operation

Identify which of the following statements is true.

Karl arranges financing for a limited partnership to purchase real estate in exchange for a 50% interest in partnership profits.Two weeks later,Karl sells the profits interest for $30,000.In this tax year,Karl must recognize

Electing large partnership rules differ from other partnership rules in all of the following areas except

In computing the ordinary income of a partnership,a deduction is allowed for

Yong contributes a machine having an adjusted basis of $20,000 and an FMV of $25,000 for a 10% partnership interest.Yong had taken $10,000 of depreciation prior to the contribution.The partnership has no liabilities.As a result of the contribution,Yong must recognize

At the formation of the BD Partnership,Betty contributes land with a basis of $10,000 and an FMV of $30,000 and Dick contributes cash of $30,000.Betty and Dick share profits and losses equally.When the land is sold two years later for $50,000,Betty must recognize a gain of

Identify which of the following statements is true.

A partner's basis for his partnership interest can be negative.

A partnership must file Form 1065 only if its income exceeds $1,000.

Identify which of the following statements is true.

The XYZ Partnership reports the following operating results for the current year: Net long-term capital loss (\ 40,000) Net Sec. 1231 loss (16,000) Ordinary income 50,000 Tai has a 20% profits interest and a 25% loss interest in the XYZ Partnership.His distributive share of ordinary income is

Which of the following is false?

Identify which of the following statements is true.

Identify which of the following statements is false.

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

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

Partnerships and S Corporations

Taxes and Investment Planning

Filters