Question 1

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

Accepted Answer

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

Question 2

No gain is recognized on the sale of property between a partnership and a more- than- 50% partner.

Accepted Answer

A) True 
 B)False

Question 3

Dinia has agreed to provide services valued at $30,000 to the L- M Partnership. On January 1 of the current year, she is given a 20% capital and profits interest in the partnership in exchange for her services. The partnership has no liabilities at the time but has assets with a basis of $50,000 and an FMV of $70,000. What are the tax consequences to Dinia and the partnership?

Accepted Answer

The transaction is taxed as if Dinia rec

Question 4

Bob contributes cash of $40,000 and Carol contributes land with a basis of $25,000 and an FMV of $40,000 to become equal partners in the BC Partnership. The partnership immediately obtains a $30,000 mortgage on the land and the partners will share the economic risk of loss equally. What are the two partners' bases in the partnership after these transactions are completed?

Accepted Answer

The answer of Bob contributes cash of $40,000 and Carol...

Question 5

Jerry has a 10% interest in the EKG Partnership capital, profits, and losses. He is a limited partner. At the beginning of the current year, his basis in his partnership interest is $10,000. The partnership earned $20,000 of ordinary income this year and repaid a $150,000 nonrecourse liability. What tax issues should Jerry consider with respect to reporting the results of this year's activities for the EKG Partnership on his personal return?

Accepted Answer

• What is Jerry's basis in his partnersh

Question 6

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

Accepted Answer

A)  If the distributive share is less than the guaranteed minimum amount, the guaranteed payment is equal to the difference between the distributive share and the guaranteed minimum amount. 
B)  The distinction between guaranteed payments and distributive shares is clear in practice. 
C)  Guaranteed payments are payments determined with regard to the partnership income. 
D)  If the distributive share is greater than the guaranteed minimum amount, the guaranteed payment is equal to the difference between the distributive share and the guaranteed minimum amount. 
A)  If the distributive share is less than the guaranteed minimum amount, the guaranteed payment is equal to the difference between the distributive share and the guaranteed minimum amount. 
B)  The distinction between guaranteed payments and distributive shares is clear in practice. 
C)  Guaranteed payments are payments determined with regard to the partnership income. 
D)  If the distributive share is greater than the guaranteed minimum amount, the guaranteed payment is equal to the difference between the distributive share and the guaranteed minimum amount.

Question 7

Identify which of the following statements is true.

Accepted Answer

A)  When a partnership assumes a liability on property contributed by a partner, the only effect on the contributing partner's basis in his or her partnership interest is that his or her basis will be increased by the amount of the liability assumed by the other partners. 
B)  A contribution of services for a partnership interest is a tax- free transaction. 
C)  For federal income tax purposes, formation of a partnership is governed by Sec. 721. 
D)  All of the above are false. 
A)  When a partnership assumes a liability on property contributed by a partner, the only effect on the contributing partner's basis in his or her partnership interest is that his or her basis will be increased by the amount of the liability assumed by the other partners. 
B)  A contribution of services for a partnership interest is a tax- free transaction. 
C)  For federal income tax purposes, formation of a partnership is governed by Sec. 721. 
D)  All of the above are false.

Question 8

Identify which of the following statements is true.

Accepted Answer

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

Question 9

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

Accepted Answer

A)  $22,000. 
B)  $34,000. 
C)  $18,000. 
D)  $11,000. 
A)  $22,000. 
B)  $34,000. 
C)  $18,000. 
D)  $11,000.

Question 10

A partnership cannot make charitable contributions.

Accepted Answer

A) True 
 B)False

Question 11

Jeremey is a partner in the Jimmy partnership. Why does he need to know his basis in his partnership interest?

Accepted Answer

Jeremey needs to know the basis of his p

Question 12

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?

Accepted Answer

A)  $$\begin{array} { | l | l | } 
\hline \text { Distributive Share } & \text { GuaranteedPayment } \
\hline \$ 80,000 & \$ 80,000 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | } 
\hline \text { Distributive Share } & \text { GuaranteedPayment } \
\hline \$ 160,000 & 0 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Distributive Share } & \text { GuaranteedPayment } \
\hline \$ 160,000 & \$ 160,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | } 
\hline \text { Distributive Share } & \text { GuaranteedPayment } \
\hline \$ 160,000 & \$ 80,000 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | l | } 
\hline \text { Distributive Share } & \text { GuaranteedPayment } \
\hline \$ 80,000 & \$ 80,000 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | } 
\hline \text { Distributive Share } & \text { GuaranteedPayment } \
\hline \$ 160,000 & 0 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Distributive Share } & \text { GuaranteedPayment } \
\hline \$ 160,000 & \$ 160,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | } 
\hline \text { Distributive Share } & \text { GuaranteedPayment } \
\hline \$ 160,000 & \$ 80,000 \
\hline
\end{array}$$

Question 13

Matt and Joel are equal partners in the MJ Partnership. For the current year ended December 31, the partnership has book income of $80,000, which includes the following deductions: (1) guaranteed payments (salaries) to partners: Matt, $35,000; and Joel, $25,000; and (2) charitable contributions, $6,000. The book income amount does not include any sales of capital assets or Sec. 1231 assets or any tax- exempt income. Based on the above information, what amount should be reported as ordinary income on the partnership return?

Accepted Answer

A)  $80,000 
B)  $140,000 
C)  $86,000 
D)  $60,000 
A)  $80,000 
B)  $140,000 
C)  $86,000 
D)  $60,000

Question 14

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?

Accepted Answer

A)  $25,000 capital gain 
B)  $15,000 capital gain and $10,000 ordinary income 
C)  $10,000 ordinary income 
D)  $25,000 ordinary income 
A)  $25,000 capital gain 
B)  $15,000 capital gain and $10,000 ordinary income 
C)  $10,000 ordinary income 
D)  $25,000 ordinary income

Question 15

Edward owns a 70% interest in the capital, profits, and losses of the Edward and Moore Partnership. During the year, Edward purchases surplus inventory from the partnership for $5,000. On the date of the sale, the inventory has an adjusted basis to the partnership of $8,000. For the year, the partnership's ordinary income is
$50,000 after including the loss on the sale of the inventory to Edward. Assuming that there are no other partnership items to be separately stated, what is Edward's distributive share of the partnership's ordinary income for the year?

Accepted Answer

The loss will not be recognized by the p

Question 16

Identify which of the following statements is true.

Accepted Answer

A)  It may be necessary for the partnership to capitalize a partner's guaranteed payment. 
B)  A partner who performs services for a partnership is usually not considered an employee of the partnership. 
C)  Guaranteed payments are ordinary income to the recipient. 
D)  All of the above are true. 
A)  It may be necessary for the partnership to capitalize a partner's guaranteed payment. 
B)  A partner who performs services for a partnership is usually not considered an employee of the partnership. 
C)  Guaranteed payments are ordinary income to the recipient. 
D)  All of the above are true.

Question 17

Identify which of the following statements is true.

Accepted Answer

A)  The amount and character of any gains/losses are determined at the partnership level. 
B)  Tax- exempt interest received by a partnership is taxable to the partners if distributed. 
C)  Partnership gains and losses from two different casualty and theft occurrences in one year are passed through to the partners as two separate items. 
D)  All of the above are false. 
A)  The amount and character of any gains/losses are determined at the partnership level. 
B)  Tax- exempt interest received by a partnership is taxable to the partners if distributed. 
C)  Partnership gains and losses from two different casualty and theft occurrences in one year are passed through to the partners as two separate items. 
D)  All of the above are false.

Question 18

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

Accepted Answer

A)  $21,000. 
B)  $20,000. 
C)  $19,000. 
D)  $22,000. 
A)  $21,000. 
B)  $20,000. 
C)  $19,000. 
D)  $22,000.

Question 19

Identify which of the following statements is true.

Accepted Answer

A)  The partner's distributive share is the partner's share of any assets distributed by the partnership. 
B)  Sam has a 20% interest in partnership capital and profits but a 40% interest in partnership losses. The partnership has no special allocations or precontribution gains or losses. In a year in which the partnership reports ordinary income of $100,000 and a capital loss of $30,000, Sam's distributive share is $20,000 ordinary income and $12,000 capital loss. 
C)  A partner's distributive share includes the full amount of partnership ordinary income, which she must report on her tax return plus her share of separately stated taxable and tax- exempt items. 
D)  All of the above are false. 
A)  The partner's distributive share is the partner's share of any assets distributed by the partnership. 
B)  Sam has a 20% interest in partnership capital and profits but a 40% interest in partnership losses. The partnership has no special allocations or precontribution gains or losses. In a year in which the partnership reports ordinary income of $100,000 and a capital loss of $30,000, Sam's distributive share is $20,000 ordinary income and $12,000 capital loss. 
C)  A partner's distributive share includes the full amount of partnership ordinary income, which she must report on her tax return plus her share of separately stated taxable and tax- exempt items. 
D)  All of the above are false.

Question 20

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

Accepted Answer

A)  $25,000. 
B)  $15,000. 
C)  $10,000. 
D)  $40,000. 
A)  $25,000. 
B)  $15,000. 
C)  $10,000. 
D)  $40,000.

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

No gain is recognized on the sale of property between a partnership and a more- than- 50% partner.

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

Identify which of the following statements is true.

Identify which of the following statements is true.

A partnership cannot make charitable contributions.

Jeremey is a partner in the Jimmy partnership. Why does he need to know his basis in his partnership interest?

Identify which of the following statements is true.

Identify which of the following statements is true.

Identify which of the following statements is true.

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

Filters

Exam 9: Partnership Formation and Operation

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

No gain is recognized on the sale of property between a partnership and a more- than- 50% partner.

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

Identify which of the following statements is true.

Identify which of the following statements is true.

A partnership cannot make charitable contributions.

Jeremey is a partner in the Jimmy partnership. Why does he need to know his basis in his partnership interest?

Identify which of the following statements is true.

Identify which of the following statements is true.

Identify which of the following statements is true.

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

Filters