Question 1

Unrealized receivables include accounts receivable for which of the following partnerships?

Accepted Answer

A)  Accrual-method partnerships. 
B)  Cash-method partnerships. 
C)  Neither cash- nor accrual-method partnerships. 
D)  Both cash- and accrual-method partnerships. 
A)  Accrual-method partnerships. 
B)  Cash-method partnerships. 
C)  Neither cash- nor accrual-method partnerships. 
D)  Both cash- and accrual-method partnerships.

Question 2

Ted is a 30 percent partner in the TDW Partnership, with an outside basis of $20,000. TDW distributes $15,000 of cash in complete liquidation of Ted's interest. Ted recognizes a capital loss of $5,000 on the distribution.

Accepted Answer

A) True 
 B)False

Question 3

Under what conditions will a partner recognize a gain in a liquidating distribution?

Accepted Answer

A)  When a partnership distributes only money and the amount of the distribution exceeds the partner's outside basis. 
B)  When a partnership distributes only money and the amount of the distribution is less than the partner's outside basis. 
C)  When a partnership distributes money, hot assets, and other property and the amount of the distribution exceeds the partner's outside basis. 
D)  When a partnership distributes money, hot assets, and other property and the amount of the distribution is less than the partner's outside basis. 
A)  When a partnership distributes only money and the amount of the distribution exceeds the partner's outside basis. 
B)  When a partnership distributes only money and the amount of the distribution is less than the partner's outside basis. 
C)  When a partnership distributes money, hot assets, and other property and the amount of the distribution exceeds the partner's outside basis. 
D)  When a partnership distributes money, hot assets, and other property and the amount of the distribution is less than the partner's outside basis.

Question 4

Locke is a 50 percent partner in the LS Partnership. Locke has a basis in his partnership interest of $84,000 at the end of the current year, prior to any distribution. On December 31, Locke receives an operating distribution of $30,000 cash. LS has no debt or hot assets. What is the amount and character of Locke's recognized gain or loss? What is Locke's ending basis in his partnership interest?

Accepted Answer

Locke recognizes no gain or lo

Question 5

Martha is a 40 percent partner in the MMM Partnership, with an outside basis of $50,000. MMM distributes $40,000 cash and accrual-basis accounts receivable with a basis and fair market value of $20,000. Martha does not recognize gain or loss on the distribution and takes a basis in the cash of $40,000 and a basis in the receivables of $10,000.

Accepted Answer

A) True 
 B)False

Question 6

Jackson is a 30 percent partner in the JJM Partnership when he sells his entire interest to Rhonda for $112,000 cash. At the time of the sale, Jackson's basis in JJM is $64,000. JJM does not have any debt or hot assets. What is Jackson's gain or loss on the sale of his interest?

Accepted Answer

A)  $48,000 capital gain. 
B)  $48,000 ordinary income. 
C)  $24,000 capital gain and $24,000 ordinary income. 
D)  Gain or loss cannot be determined. 
A)  $48,000 capital gain. 
B)  $48,000 ordinary income. 
C)  $24,000 capital gain and $24,000 ordinary income. 
D)  Gain or loss cannot be determined.

Question 7

Which of the following statements regarding disproportionate distributions is false?

Accepted Answer

A)  A disproportionate distribution occurs when a partner receives more than his proportionate share of the partnership's hot assets. 
B)  A disproportionate distribution occurs when a partner receives less than his proportionate share of the partnership's hot assets. 
C)  The tax provisions related to disproportionate distributions attempt to preserve the partners' share of ordinary income potential. 
D)  Disproportionate distributions will only occur in liquidating distributions. 
A)  A disproportionate distribution occurs when a partner receives more than his proportionate share of the partnership's hot assets. 
B)  A disproportionate distribution occurs when a partner receives less than his proportionate share of the partnership's hot assets. 
C)  The tax provisions related to disproportionate distributions attempt to preserve the partners' share of ordinary income potential. 
D)  Disproportionate distributions will only occur in liquidating distributions.

Question 8

In the sale of a partnership interest, a selling partner will recognize ordinary income (rather than capital gain) when the partnership assets include cash and land held for five years as an investment.

Accepted Answer

A) True 
 B)False

Question 9

Jaime has a basis in her partnership interest of $50,000 when the partnership distributes (in an operating distribution) two parcels of land to Jaime, each valued at $30,000. Prior to the distribution, the partnership's basis in parcel A is $40,000 and the basis in parcel B is $20,000. Jaime allocates $20,000 of basis to parcel A and $30,000 of basis to parcel B.

Accepted Answer

A) True 
 B)False

Question 10

A disproportionate distribution is a distribution in which the partner's share of the partnership's hot assets either increases or decreases as a result of the distribution.

Accepted Answer

A) True 
 B)False

Question 11

Tyson is a 25 percent partner in the KT Partnership. On January 1, KT makes a proportionate, liquidating distribution of $16,000 cash and land with a $16,000 fair value (inside basis $8,000) to Tyson. KT has no liabilities at the date of the distribution. Tyson's basis in his KT Partnership interest is $20,000. What is the amount and character of Tyson's gain or loss from the distribution?

Accepted Answer

A)  $0. 
B)  $4,000 capital gain. 
C)  $12,000 ordinary income. 
D)  $12,000 capital gain. 
A)  $0. 
B)  $4,000 capital gain. 
C)  $12,000 ordinary income. 
D)  $12,000 capital gain.

Question 12

In an operating distribution, when a partnership distributes property other than money with a basis that exceeds the partner's outside basis, the partner assigns a carryover basis to the distributed asset and recognizes a gain.

Accepted Answer

A) True 
 B)False

Question 13

The VRX Partnership (a calendar year-end entity) has the following assets and no liabilities:
   The equipment was purchased for $360,000 and VRX has taken $90,000 of depreciation. The stock was purchased seven years ago. What are VRX's hot assets for purposes of a sale of partnership interest?

Accepted Answer

The hot assets include the pot

Question 14

Jason is a 25 percent partner in the JJM Partnership when he sells his entire interest to Lavelle for $76,000. At the time of the sale, Jason's basis in JJM is $87,000. JJM does not have any debt or hot assets. Jason will recognize a gain of $11,000 on the sale of his partnership interest.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is false concerning partnership liquidating distributions?

Accepted Answer

A)  A partner who receives a liquidating distribution can retain an interest in the partnership. 
B)  A partnership agreement may restrict the sale of a partnership, making a liquidating distribution the only way a partner can close out his interest in the partnership. 
C)  Liquidating a single partner's interest is similar in concept to a corporate redemption of a shareholder's interest. 
D)  None of these statements are false. 
A)  A partner who receives a liquidating distribution can retain an interest in the partnership. 
B)  A partnership agreement may restrict the sale of a partnership, making a liquidating distribution the only way a partner can close out his interest in the partnership. 
C)  Liquidating a single partner's interest is similar in concept to a corporate redemption of a shareholder's interest. 
D)  None of these statements are false.

Question 16

Tyson, a one-quarter partner in the TF Partnership, receives a proportionate distribution to liquidate his partnership interest on January 1. The distribution consists of $70,000 cash and inventory with a fair value of $40,000 (inside basis is $22,000). Tyson's outside basis is $90,000, including his $10,000 share of TF's liabilities. What is the amount and character of Tyson's recognized gain or loss? What is Tyson's basis in the distributed inventory?

Accepted Answer

Tyson does not recognize any gain or los

Question 17

Randolph is a 30 percent partner in the RD Partnership. On January 1, RD distributes $15,000 cash, inventory with a fair value of $20,000 (inside basis of $10,000), and a parcel of land with a fair value of $10,000 (inside basis of $5,000) to Randolph in complete liquidation of his interest. RD has no liabilities at the date of the distribution. Randolph's basis in his RD Partnership interest is $37,000. What is Randolph's basis in the distributed inventory and land?

Accepted Answer

A)  $10,000 inventory, $10,000 land. 
B)  $10,000 inventory, $5,000 land. 
C)  $20,000 inventory, $10,000 land. 
D)  $10,000 inventory, $12,000 land. 
A)  $10,000 inventory, $10,000 land. 
B)  $10,000 inventory, $5,000 land. 
C)  $20,000 inventory, $10,000 land. 
D)  $10,000 inventory, $12,000 land.

Question 18

Daniela is a 25 percent partner in the JRD Partnership. On January 1, JRD makes a proportionate liquidating distribution of $20,000 cash and inventory with a $15,000 fair value (inside basis $5,000) to Daniela. JRD has no liabilities at the date of the distribution. Daniela's basis in her JRD Partnership interest is $21,000. What is the amount and character of Daniela's gain or loss from the distribution?

Accepted Answer

A)  $0. 
B)  $14,000 ordinary income. 
C)  $4,000 capital loss. 
D)  $4,000 capital gain. 
A)  $0. 
B)  $14,000 ordinary income. 
C)  $4,000 capital loss. 
D)  $4,000 capital gain.

Question 19

Which of the following statements regarding a partner's basis of inventory received in a liquidating distribution is true?

Accepted Answer

A)  Partners may either increase or decrease the basis in inventory distributed in a liquidating distribution. 
B)  Partners may only increase the basis in inventory distributed in a liquidating distribution. 
C)  Partners may only decrease the basis in inventory distributed in a liquidating distribution. 
D)  None of these statements are true. 
A)  Partners may either increase or decrease the basis in inventory distributed in a liquidating distribution. 
B)  Partners may only increase the basis in inventory distributed in a liquidating distribution. 
C)  Partners may only decrease the basis in inventory distributed in a liquidating distribution. 
D)  None of these statements are true.

Question 20

Which of the following statements regarding the sale of a partnership interest is false?

Accepted Answer

A)  The seller's primary tax concern in a partnership interest sale is calculating the amount and character of gain or loss on the sale. 
B)  The selling partner determines the gain or loss as the difference between the amount realized and her outside basis in the partnership. 
C)  Hot assets change the character of a gain on the sale from ordinary income to capital gain. 
D)  Any debt relief increases the amount the partner realizes from the sale. 
A)  The seller's primary tax concern in a partnership interest sale is calculating the amount and character of gain or loss on the sale. 
B)  The selling partner determines the gain or loss as the difference between the amount realized and her outside basis in the partnership. 
C)  Hot assets change the character of a gain on the sale from ordinary income to capital gain. 
D)  Any debt relief increases the amount the partner realizes from the sale.

Unrealized receivables include accounts receivable for which of the following partnerships?

Ted is a 30 percent partner in the TDW Partnership, with an outside basis of $20,000. TDW distributes $15,000 of cash in complete liquidation of Ted's interest. Ted recognizes a capital loss of $5,000 on the distribution.

Under what conditions will a partner recognize a gain in a liquidating distribution?

Jackson is a 30 percent partner in the JJM Partnership when he sells his entire interest to Rhonda for $112,000 cash. At the time of the sale, Jackson's basis in JJM is $64,000. JJM does not have any debt or hot assets. What is Jackson's gain or loss on the sale of his interest?

Which of the following statements regarding disproportionate distributions is false?

In the sale of a partnership interest, a selling partner will recognize ordinary income (rather than capital gain) when the partnership assets include cash and land held for five years as an investment.

A disproportionate distribution is a distribution in which the partner's share of the partnership's hot assets either increases or decreases as a result of the distribution.

In an operating distribution, when a partnership distributes property other than money with a basis that exceeds the partner's outside basis, the partner assigns a carryover basis to the distributed asset and recognizes a gain.

The VRX Partnership (a calendar year-end entity) has the following assets and no liabilities: The equipment was purchased for $360,000 and VRX has taken $90,000 of depreciation. The stock was purchased seven years ago. What are VRX's hot assets for purposes of a sale of partnership interest?

Jason is a 25 percent partner in the JJM Partnership when he sells his entire interest to Lavelle for $76,000. At the time of the sale, Jason's basis in JJM is $87,000. JJM does not have any debt or hot assets. Jason will recognize a gain of $11,000 on the sale of his partnership interest.

Which of the following statements is false concerning partnership liquidating distributions?

Which of the following statements regarding a partner's basis of inventory received in a liquidating distribution is true?

Which of the following statements regarding the sale of a partnership interest is false?

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters

Exam 10: Dispositions of Partnership Interests and Partnership Distributions

Unrealized receivables include accounts receivable for which of the following partnerships?

Ted is a 30 percent partner in the TDW Partnership, with an outside basis of $20,000. TDW distributes $15,000 of cash in complete liquidation of Ted's interest. Ted recognizes a capital loss of $5,000 on the distribution.

Under what conditions will a partner recognize a gain in a liquidating distribution?

Jackson is a 30 percent partner in the JJM Partnership when he sells his entire interest to Rhonda for $112,000 cash. At the time of the sale, Jackson's basis in JJM is $64,000. JJM does not have any debt or hot assets. What is Jackson's gain or loss on the sale of his interest?

Which of the following statements regarding disproportionate distributions is false?

In the sale of a partnership interest, a selling partner will recognize ordinary income (rather than capital gain) when the partnership assets include cash and land held for five years as an investment.

A disproportionate distribution is a distribution in which the partner's share of the partnership's hot assets either increases or decreases as a result of the distribution.

In an operating distribution, when a partnership distributes property other than money with a basis that exceeds the partner's outside basis, the partner assigns a carryover basis to the distributed asset and recognizes a gain.

The VRX Partnership (a calendar year-end entity) has the following assets and no liabilities: The equipment was purchased for $360,000 and VRX has taken $90,000 of depreciation. The stock was purchased seven years ago. What are VRX's hot assets for purposes of a sale of partnership interest?

Jason is a 25 percent partner in the JJM Partnership when he sells his entire interest to Lavelle for $76,000. At the time of the sale, Jason's basis in JJM is $87,000. JJM does not have any debt or hot assets. Jason will recognize a gain of $11,000 on the sale of his partnership interest.

Which of the following statements is false concerning partnership liquidating distributions?

Which of the following statements regarding a partner's basis of inventory received in a liquidating distribution is true?

Which of the following statements regarding the sale of a partnership interest is false?

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters