Question 1

The definition of "unrealized receivable" does not include the

Accepted Answer

A)  right to payment for services performed by a cash- basis taxpayer. 
B)  right to payment for services performed by an accrual- basis taxpayer. 
C)  recapture potential on Sec. 1250 property. 
D)  recapture potential on Sec. 1245 property. 
A)  right to payment for services performed by a cash- basis taxpayer. 
B)  right to payment for services performed by an accrual- basis taxpayer. 
C)  recapture potential on Sec. 1250 property. 
D)  recapture potential on Sec. 1245 property. B

Question 2

What conditions are required for a partner to recognize a loss upon receipt of a distribution from a partnership?

Accepted Answer

A partner can recognize a loss on a distribution only if the distribution is a liquidating distribution that consists of money, unrealized receivables, and inventory. The partner recognizes a loss if the amount of money and the carryover basis of the receivables and inventory are less than the partner's predistribution basis in his or her partnership interest.

Question 3

The STU Partnership, an electing Large Partnership, has no passive activities and reports the following transactions for the year: net long- term capital losses $50,000, Sec. 1231 gain $60,000, ordinary income $20,000, charitable contributions $15,000, and tax- exempt income $2,000. How much will be reported as ordinary income to its partners?

Accepted Answer

A)  $22,000 
B)  $5,000 
C)  $20,000 
D)  $17,000 
A)  $22,000 
B)  $5,000 
C)  $20,000 
D)  $17,000 D

Question 4

Tenika has a $10,000 basis in her interest in the TF Partnership and no remaining precontribution gain immediately before receiving a current distribution that consisted of $4,000 in money, plastic tubes held in inventory with a $3,000 basis to the partnership and an FMV of $3,375, and drip irrigation pipe held as inventory with a $6,000 basis to the partnership and an FMV of $5,000. What is the basis in Tenika's hands of the distributed property?

Accepted Answer

A)  $6,000 
B)  $10,000 
C)  $10,125 
D)  $9,000 
A)  $6,000 
B)  $10,000 
C)  $10,125 
D)  $9,000

Question 5

Eicho's interest in the DPQ Partnership is terminated when her basis in the partnership is $70,000. She receives a liquidating distribution of $20,000 cash and inventory with a $24,000 basis and a $40,000 FMV. She also receives, as part of the distribution, a desk that has a $100 basis and a $200 FMV to the partnership. What is her gain or loss, and what is her basis in the items received?

Accepted Answer

She does not recognize any los

Question 6

Can a partner recognize both a gain and a loss on the sale of a partnership interest? If so, under what conditions?

Accepted Answer

A partner must divide the sale of a part

Question 7

The total bases of all distributed property in the partner's hands following a nonliquidating distribution is limited to

Accepted Answer

A)  the predistribution FMV of the partner's partnership interest. 
B)  the FMV of the property distributed. 
C)  the partner's predistribution basis in his partnership interest. 
D)  the partnership's bases in the distributed property. 
A)  the predistribution FMV of the partner's partnership interest. 
B)  the FMV of the property distributed. 
C)  the partner's predistribution basis in his partnership interest. 
D)  the partnership's bases in the distributed property.

Question 8

In a current distribution, the partner's basis in the partnership interest is reduced by the amount of money received and by the partnership's bases in the distributed property.

Accepted Answer

A) True 
 B)False

Question 9

Eicho's interest in the DPQ Partnership is terminated when her basis in the partnership is $70,000. She receives a liquidating distribution of $20,000 cash and inventory with a $24,000 basis and a $40,000 FMV. What is her gain or loss, and what is her basis in the inventory received?

Accepted Answer

She has a recognized loss of $

Question 10

Derrick's interest in the DEF Partnership is liquidated when his basis in the interest is $30,000. He receives a liquidating distribution of $20,000 cash and inventory with a basis of $8,000 and an FMV of $30,000. Derrick will recognize

Accepted Answer

A)  $2,000 ordinary loss. 
B)  $2,000 capital loss. 
C)  $10,000 capital loss and $20,000 ordinary loss. 
D)  no gain or loss. 
A)  $2,000 ordinary loss. 
B)  $2,000 capital loss. 
C)  $10,000 capital loss and $20,000 ordinary loss. 
D)  no gain or loss.

Question 11

For tax purposes, a partner who receives retirement payments ceases to be regarded as a partner

Accepted Answer

A)  on the day on which the partner retires. 
B)  on the last day of the month in which the partner retires. 
C)  on the last day of the taxable year in which the partner retires. 
D)  only after the partner's last payment is received. 
A)  on the day on which the partner retires. 
B)  on the last day of the month in which the partner retires. 
C)  on the last day of the taxable year in which the partner retires. 
D)  only after the partner's last payment is received.

Question 12

Becky has a $24,000 basis in her partnership interest. She receives a current distribution of $4,000 cash, unrealized receivables with a basis of $12,000 and an FMV of $16,000, and land held as an investment with a basis of $3,000 and an FMV of $8,000. The partners' relative interests in the Sec. 751 assets do not change as a result of the current distribution. The basis of her partnership interest following the distribution is

Accepted Answer

A)  ($4,000). 
B)  $1,000. 
C)  $5,000. 
D)  $0. 
A)  ($4,000). 
B)  $1,000. 
C)  $5,000. 
D)  $0.

Question 13

The limited liability company (LLC) has become a popular business form because of its limited liability protection for its owner. The S corporation also provides limited liability protection for its owner. What advantages does an LLC provide that are not available with an S corporation?

Accepted Answer

• The LLC is taxed as a partnership unde

Question 14

$$\begin{array} { l l } 
\text { Predistribution basis in JJ } & \$ 50,000 \
\text { Minus: money received } & ( 8,000 ) \
\text { carry over basis in A/R } & ( 0 ) \
\text { carry over basis in land } & ( \underline { 28,000 } ) \
\text { Postdistribution basis in JJ } & \$ 14,000
\end{array}$$ When Rachel's basis in her interest in the RST Partnership is $40,000, she receives a current distribution of office equipment. The equipment has an FMV of $60,000 and a basis of $50,000. Rachel will not use the office equipment in a business activity. What tax issues should Rachel consider with respect to the distribution?

Accepted Answer

• Does Rachel recognize a gain or loss o

Question 15

Identify which of the following statements is true.

Accepted Answer

A)  Unrealized receivables include rights to payments on the sale of a capital asset. 
B)  The primary purpose of Sec. 751 is to prevent partnerships from converting capital gains into ordinary income. 
C)  If a partner sells property received in a partnership distribution for a gain and the property was inventory in the hands of the distributing partnership, the partner will always recognize ordinary income. 
D)  All of the above are false. 
A)  Unrealized receivables include rights to payments on the sale of a capital asset. 
B)  The primary purpose of Sec. 751 is to prevent partnerships from converting capital gains into ordinary income. 
C)  If a partner sells property received in a partnership distribution for a gain and the property was inventory in the hands of the distributing partnership, the partner will always recognize ordinary income. 
D)  All of the above are false.

Question 16

What are the advantages of a firm being formed as a limited liability company (LLC) instead of as a limited partnership?

Accepted Answer

From a legal standpoint, all the owners

Question 17

Identify which of the following statements is true.

Accepted Answer

A)  The partner's basis in the partnership interest is normally reduced by the FMV of property distributed in a nonliquidating distribution. 
B)  When a current distribution from a partnership reduces the basis of the partnership interest to zero, the partner's interest in the partnership is terminated. 
C)  If a partnership asset with a deferred precontribution gain is distributed in a nonliquidating distribution to the partner who contributed the asset, the precontribution gain must be recognized by the partner. 
D)  All of the above are false. 
A)  The partner's basis in the partnership interest is normally reduced by the FMV of property distributed in a nonliquidating distribution. 
B)  When a current distribution from a partnership reduces the basis of the partnership interest to zero, the partner's interest in the partnership is terminated. 
C)  If a partnership asset with a deferred precontribution gain is distributed in a nonliquidating distribution to the partner who contributed the asset, the precontribution gain must be recognized by the partner. 
D)  All of the above are false.

Question 18

The XYZ Partnership owns the following assets on December 31:
$\begin{array}{|l|l|l|} 
\hline& \text { Basis } & \text { FMV } \
\hline \text { Cash } & \$ 10,000 & \$ 10,000 \
\hline \text { Unrealized receivables } & 0 & 10,000 \
\hline \text { Inventory } & \$ 25,000 & 30,000\\hline
\end{array}$ A partner has a 20% interest with a basis of $6,000 in XYZ before receiving a liquidating distribution
$10,000 cash. XYZ Partnership has no liabilities. His recognized gain is

Accepted Answer

A)  $3,000 ordinary income. 
B)  $4,000 capital gain. 
C)  $3,000 ordinary income and $1,000 capital gain. 
D)  $3,000 capital gain and $1,000 ordinary income. 
A)  $3,000 ordinary income. 
B)  $4,000 capital gain. 
C)  $3,000 ordinary income and $1,000 capital gain. 
D)  $3,000 capital gain and $1,000 ordinary income.

Question 19

On December 31, Kate sells her 20% interest (with a basis of $18,000 which, of course, includes a share of partnership liabilities) in the KLM Partnership to Karl for $27,000 cash plus assumption of her $6,000 share of liabilities. On that date, the partnership has the following balance sheet: $$\begin{array} { | l | r | c | } 
\hline  { \text { Assets } } & \text { Basis } & \text { Fair Market Value } \
\hline \text { Cash } & \$ 30,000 & \$ 30,000 \
\text { Accounts receivable } & 0 & 20,000 \
\text { Inventory } & 15,000 & 25,000 \
\text { Land } & \underline { 45,000 } & \underline { 90,000 } \
\text { Total } & \underline { \$ 90,000 } & \underline { \$ 165,000 } \
\hline
\end{array}$$ $$\begin{array} { | l | r | c | } 
\hline  { \text { Equities } } & \text { Basis } & \text { Fair Market Value } \
\hline \text { Notes payable } & \$ 30,000 & \$ 30,000 \
\text { Kate, capital } & 12,000 & 27,000 \
\text { Lynn, capital } & 24,000 & 54,000 \
\text { Mark, capital } & \underline { 24,000 } & \underline { 54,000 } \
\text { Total } & \underline { \$ 90,000 } & \$ 165,000 \
\hline
\end{array}$$ What are the amount and character of the gain that Kate must recognize on the sale?

Accepted Answer

The answer of On December 31, Kate sells her 20%...

Question 20

Identify which of the following statements is true.

Accepted Answer

A)  The basis for property distributed by a partnership cannot be increased above the carryover basis amount when it is received by a partner in a nonliquidating distribution. 
B)  The length of time a partner owns a partnership interest is relevant when determining the holding period for distributed property. 
C)  A partner's partnership capital account balance cannot be less than zero. 
D)  All of the above are false. 
A)  The basis for property distributed by a partnership cannot be increased above the carryover basis amount when it is received by a partner in a nonliquidating distribution. 
B)  The length of time a partner owns a partnership interest is relevant when determining the holding period for distributed property. 
C)  A partner's partnership capital account balance cannot be less than zero. 
D)  All of the above are false.

The definition of "unrealized receivable" does not include the

What conditions are required for a partner to recognize a loss upon receipt of a distribution from a partnership?

Can a partner recognize both a gain and a loss on the sale of a partnership interest? If so, under what conditions?

The total bases of all distributed property in the partner's hands following a nonliquidating distribution is limited to

In a current distribution, the partner's basis in the partnership interest is reduced by the amount of money received and by the partnership's bases in the distributed property.

Eicho's interest in the DPQ Partnership is terminated when her basis in the partnership is $70,000. She receives a liquidating distribution of $20,000 cash and inventory with a $24,000 basis and a $40,000 FMV. What is her gain or loss, and what is her basis in the inventory received?

Derrick's interest in the DEF Partnership is liquidated when his basis in the interest is $30,000. He receives a liquidating distribution of $20,000 cash and inventory with a basis of $8,000 and an FMV of $30,000. Derrick will recognize

For tax purposes, a partner who receives retirement payments ceases to be regarded as a partner

The limited liability company (LLC) has become a popular business form because of its limited liability protection for its owner. The S corporation also provides limited liability protection for its owner. What advantages does an LLC provide that are not available with an S corporation?

Identify which of the following statements is true.

What are the advantages of a firm being formed as a limited liability company (LLC) instead of as a limited partnership?

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

Partnership Formation and Operation

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 10: Special Partnership Issues

The definition of "unrealized receivable" does not include the

What conditions are required for a partner to recognize a loss upon receipt of a distribution from a partnership?

Can a partner recognize both a gain and a loss on the sale of a partnership interest? If so, under what conditions?

The total bases of all distributed property in the partner's hands following a nonliquidating distribution is limited to

In a current distribution, the partner's basis in the partnership interest is reduced by the amount of money received and by the partnership's bases in the distributed property.

Eicho's interest in the DPQ Partnership is terminated when her basis in the partnership is $70,000. She receives a liquidating distribution of $20,000 cash and inventory with a $24,000 basis and a $40,000 FMV. What is her gain or loss, and what is her basis in the inventory received?

Derrick's interest in the DEF Partnership is liquidated when his basis in the interest is $30,000. He receives a liquidating distribution of $20,000 cash and inventory with a basis of $8,000 and an FMV of $30,000. Derrick will recognize

For tax purposes, a partner who receives retirement payments ceases to be regarded as a partner

The limited liability company (LLC) has become a popular business form because of its limited liability protection for its owner. The S corporation also provides limited liability protection for its owner. What advantages does an LLC provide that are not available with an S corporation?

Identify which of the following statements is true.

What are the advantages of a firm being formed as a limited liability company (LLC) instead of as a limited partnership?

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

Partnership Formation and Operation

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

U.S. Taxation of Foreign-Related Transactions

Filters