Exam 9: Partnership Formation and Operation

At the beginning of the current year, Terry has a $40,000 basis for his general partnership interest in the TKE Partnership. He materially participates in the business activities of the partnership. On November 1, he receives a $4,000 distribution. His distributive share of TKE's current items is a $5,000 net long- term capital gain and a $50,000 ordinary loss. What amount will he include in his current year's tax return?

The RT Limited Partnership incurs the following expenses during the time that the partnership is being organize What is the maximum amount that the partnership can deduct as an organization and syndication expense for th first year in which the partnership begins business, assuming the business began on October 1?

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

Formation of a partnership requires legal documentation filed with the Secretary of State.

Identify which of the following statements is true.

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?

On January 2 of the current year, Calloway and Taylor contribute cash equally to form the CT Partnership. Calloway and Taylor share profits and losses in a ratio of 75% and 25%, respectively. The partnership's ordinary income for the year was $40,000. Calloway received a distribution of $5,000 during the year. What is Calloway's share of taxable income for the year?

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

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?

Identify which of the following statements is true.

The definition of a partnership does not include

Elijah contributes securities with a $90,000 FMV (purchased in 2008 at a cost of $50,000) to become a one- third partner in the EJK Partnership on January 1 of the current year. The securities are sold on December 15 of the current year for $105,000. How much of the partnership's capital gain from the sale of these securities should be allocated to Elijah?

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?

Jangyoun sells investment land having a $30,000 basis to a partnership in which he has a 60% partnership interest. The partnership pays $26,000 (FMV) for the land. Later, the partnership sells the investment land to a nonpartner for $31,000. On the sale of the land, the partnership must recognize a

Identify which of the following statements is true.

Electing large partnership rules differ from other partnership rules in all of the following areas except

Bob, Kara, and Mark are partners in the BKM Partnership. Bob is a 40% partner and has a June 30 tax year- end. Kara owns a 40% interest in the partnership and has a September 30 tax year- end, and Mark owns the remaining 20% interest and has an October 31 tax year- end. The partnership does not have a natural business year. What is the required tax year- end for the partnership (if no Sec. 444 election is made)?

Doug purchases a 20% interest in the Quix Partnership for $10,000 on January 1, 2019, and begins to materially participate in the partnership's business. The Quix Partnership uses the calendar year as its tax year. At the time of the purchase, the Quix Partnership has $4,000 in liabilities, and Doug's share is 20%. What is Doug's basis in his partnership interest on January 1, 2010?

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

Briefly explain the aggregate and entity theories as they relate to partnerships.