Exam 9: Partnership Formation and Operation

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?

AT Pet Spa is a partnership owned equally by Travis and Ashley. The partnership had the following revenues an expenses this year. Which of the following items are separately stated? Nonseparately stated? What is each partn distributive share of ordinary income? Revenues \ 500,000 Salary expense (nonpartners) 250,000 Supplies 40,000 Insurance 50,000 Depreciation (no Sec. 179 amounts) 10,000 Dividend income 2,000 Long- term capital gain 30,000

What are the three rules and their order when determining a partnership tax year?

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

Identify which of the following statements is true.

Janice has a 30% interest in the Jansen Partnership. She is to receive a guaranteed payment for deductible services of $50,000. The partnership reports $30,000 of ordinary income and a $100,000 long- term capital gain before deducting the guaranteed payment. What is her income from the partnership?

Stan had a basis in his partnership interest at the beginning of last year of $30,000. There was no change in partnership liabilities during the year. His share of the partnership's ordinary loss last year was $40,000 and the partnership had no separately stated items. This year, Stan has a distributive share of ordinary income of $30,000. The taxable income from the partnership reported on Stan's personal income tax return this year (ignoring the at- risk and passive activity loss limitations) is

Dan purchases a 25% interest in the Haymarket Partnership for $20,000 on January 1, and begins to materially participate in the partnership's business. The Haymarket Partnership uses the calendar year as its tax year. At the time of the purchase, the Haymarket Partnership has $2,000 in liabilities, and Dan's share is 25%. During the year, the Haymarket Partnership incurs $100,000 in losses and its liabilities increase by $4000. What is Dan's basis in his partnership interest on December 31?

Tracy has a 25% profit interest and a 20% loss interest in the Dupont Partnership. The Dupont Partnership report following income and loss items for the current year: Net long- term capital loss \ 50,000 Net Sec. 1231 gain 45,000 Ordinary income 110,000 What is Tracy's distributive share?

Identify which of the following statements is false.

Clark and Lewis are partners who share the profits and losses of the C&L Partnership 60% and 40%, respectively. The tax basis of each partner's interest in the partnership as of December 31 of last year was as follows: Clark, $14,000; Lewis, $12,000. During the current year, the partnership had ordinary income of $20,000 and a long- term capital loss of $10,000 from the sale of securities. The partnership made cash distributions proportionately to the two partners during this year totaling $20,000. What is the amount of Lewis's tax basis of his partnership interest on December 31 of the current year?

George receives a 10% limited partnership interest (capital and profits interest) in the HIJ Partnership in return for managing the partnership's rental property. The partnership interest has an FMV of $35,000. What is the amount and character of the income (if any) that George must report as a result of becoming a partner?

Explain the tax consequences for both the service partner and the partnership when a contribution of services is made to the partnership.

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 Guaranteedpayment \ 36,000 What is his self- employment income?

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?

The Troika Partnership has an ordinary loss of $48,000 for the year. Before allocation of the loss at the end of the year, Shaad's one- third limited partnership interest has an adjusted basis of $5,000. Shaad's only other income or loss is his $30,000 salary from a factory job. What amount can Shaad deduct on his tax return as his share of the partnership's loss?

Jane contributes land with an FMV of $100,000 and a basis of $80,000 to the Green Partnership in exchange for a 25% partnership interest. The partnership assumes the $40,000 mortgage on the land. Mary has a 25% share of partnership liabilities. The Green Partnership has $8,000 in liabilities immediately before Jane's contribution. What is Jane's basis in her partnership interest?

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

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?

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