Exam 9: Partnership Formation and Operation

On January 1,Helmut pays $2,000 for a 10% capital,profits,and loss interest in a partnership,which has recourse liabilities of $20,000.The partners share economic risk of loss from recourse liabilities in the same way they share partnership losses.In the same year,the partnership incurs losses of $6,000 and the recourse liabilities increase by $5,000.Helmut and the partnership use a calendar tax year-end.Helmut's basis at year-end is

Martin is a limited partner in a card shop.At the end of the partnership's tax year,Martin's basis in the partnership interest is $25,000 ($5,000 cash investment plus a $20,000 share of nonqualified nonrecourse financing).Martin's distributive share of partnership losses for the tax year is $33,000.Martin has $30,000 of passive income this year from other activities.How much of the $33,000 partnership loss can be used by Martin in the year of the loss?

Allen contributed land,which was being held for sale to Allen's customers,to a partnership in exchange for a 20% interest.The partnership uses the land in its business for three years and then sells the property.When the property was contributed,it had a basis in Allen's hands of $500,000 and an FMV of $600,000.The partnership sells the land for $700,000.The gain reported by the partnership is

Under what conditions will a special allocation of partnership depreciation be recognized? Assume the partnership has no nonrecourse liabilities.

Identify which of the following statements is true.

Guaranteed payments are always ordinary income to the recipient.

A partner's "distributive share" is the partner's share of any assets distributed by the partnership.

Nicholas,a 40% partner in Nedeau Partnership,gives one-half of his interest to his sister,Michelle.During the current year,Nicholas performs services for the partnership for which reasonable compensation is $80,000,but for which he accepts no pay.Nicholas and Michelle are each credited with a $100,000 distributive share,all of which is ordinary income.What are Nicholas' and Michelle's distributive share?

ABC Partnership distributes $12,000 to partner Al.Al's distributive share of partnership income is $20,000.Al is taxed on $20,000.

Albert contributes a Sec.1231 asset to a partnership on June 1 of this year in exchange for a 10% partnership interest.He had purchased the asset on March 1,2002.His holding period for the partnership interest begins

Mario contributes inventory to a partnership on August 1 of this year in exchange for a 20% partnership interest.Mario had purchased the inventory on July 2 of last year.His holding period for the partnership interest begins

In January of this year,Arkeva,a calendar-year taxpayer,receives a $50,000 guaranteed payment from NFR Partnership.NFR deducted the payment during its tax year ending November 30 of last year.What tax year must Arkeva report her guaranteed payment in?

Henry has a 30% interest in the HMS Partnership's capital,profits,and losses computed after taking into account his guaranteed payment of $40,000.In the current year,HMS reports ordinary income of $30,000 and capital gains of $60,000 before taking into account Henry's guaranteed payment.What is the amount and character of all income or loss that Henry must report as a result of partnership activities?

Identify which of the following statements is true.

Identify which of the following statements is true.