Question 1

Identify which of the following statements is true.

Accepted Answer

A)  An exchange of partnership interests in different partnerships qualifies under the like- kind exchange rules. 
B)  John Albin is a retired partner of Brill & Crum, a personal service partnership. Albin has not rendered any services to Brill & Crum since his retirement six years ago. Under the provisions of Albin's retirement agreement, Brill & Crum is obligated to pay Albin 10% of the partnership's net income each year through the end of the current year. In compliance with the agreement, Brill & Crum pay Albin $25,000 in the current year. Albin should treat this $25,000 as a long- term capital gain. 
C)  The payment for partnership property to a retiring partner is not deductible by the partnership and often not income to the retiring partner. 
D)  All of the above are false. 
A)  An exchange of partnership interests in different partnerships qualifies under the like- kind exchange rules. 
B)  John Albin is a retired partner of Brill & Crum, a personal service partnership. Albin has not rendered any services to Brill & Crum since his retirement six years ago. Under the provisions of Albin's retirement agreement, Brill & Crum is obligated to pay Albin 10% of the partnership's net income each year through the end of the current year. In compliance with the agreement, Brill & Crum pay Albin $25,000 in the current year. Albin should treat this $25,000 as a long- term capital gain. 
C)  The payment for partnership property to a retiring partner is not deductible by the partnership and often not income to the retiring partner. 
D)  All of the above are false.

Question 2

Under Sec. 751, unrealized receivables include potential Section 1245 or 1250 recapture on the partnership's depreciable property.

Accepted Answer

A) True 
 B)False

Question 3

The XYZ Partnership owns the following assets on December 31:   By how much must XYZ reduce its unrealized receivables to avoid meeting the substantially apprec inventory test?

Accepted Answer

A)  $10,000 
B)  $15,000 
C)  $14,000 
D)  No amount of reduction of unrealized receivables will affect meeting the substantially appreciated inventory test. 
A)  $10,000 
B)  $15,000 
C)  $14,000 
D)  No amount of reduction of unrealized receivables will affect meeting the substantially appreciated inventory test.

Question 4

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 5

Under the check- the- box rules, an LLC with more than one member is taxed as a partnership unless it elects to be taxed as a corporation.

Accepted Answer

A) True 
 B)False

Question 6

A partnership cannot recognize a gain or loss on a current distribution.

Accepted Answer

A) True 
 B)False

Question 7

Carlos has a basis in his partnership interest of $30,000. He receives a current distribution of $6,000 cash, unrealized receivables (FMV $11,000, basis $10,000), inventory (FMV $8,000, basis $4,000), land held as an investment (FMV $7,000, basis, $6,000), and building (FMV $21,000, basis $9,000). The partners' relative interests in the Sec. 751 assets do not change as a result of the current distribution. Carlos's basis in the building is

Accepted Answer

A)  $6,000. 
B)  $9,000. 
C)  $7,500. 
D)  $2,500. 
A)  $6,000. 
B)  $9,000. 
C)  $7,500. 
D)  $2,500.

Question 8

The Tandy Partnership owns the following assets on December 31:   Is the partnership's inventory considered to be substantially appreciated for purposes of Sec. 751? Show your work.

Accepted Answer

For purposes of the substantially apprec

Question 9

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 long- term capital gains to its partners?

Accepted Answer

A)  $0 
B)  $50,000 
C)  $60,000 
D)  $10,000 
A)  $0 
B)  $50,000 
C)  $60,000 
D)  $10,000

Question 10

Do most distributions made by a partnership require a Sec. 751 calculation?

Accepted Answer

No. Many current distributions are made

Question 11

Identify which of the following statements is false.

Accepted Answer

A)  When a partnership interest is sold, the buyer and seller can allocate the sale price among the Sec. 751 assets and non- Sec. 751 assets in any reasonable manner. 
B)  On June 30 of the current year, James Roe sells his interest in the Roe & Doe Partnership for $30,000. Roe's adjusted basis in Roe & Doe at June 30 is $7,500 before apportionment of any partnership income for the current year. The Roe & Doe Partnership uses the calendar year as its tax year and has no liabilities on June 30. Roe's distributive share of partnership income up to June 30 is $22,500. Roe acquired his interest in the partnership five years ago. Roe will have a long- term capital gain on the sale of his interest of $22,500. 
C)  Section 751 assets include all inventory and all unrealized receivables in a sale or exchange situation. 
D)  Statements B and C are true. 
A)  When a partnership interest is sold, the buyer and seller can allocate the sale price among the Sec. 751 assets and non- Sec. 751 assets in any reasonable manner. 
B)  On June 30 of the current year, James Roe sells his interest in the Roe & Doe Partnership for $30,000. Roe's adjusted basis in Roe & Doe at June 30 is $7,500 before apportionment of any partnership income for the current year. The Roe & Doe Partnership uses the calendar year as its tax year and has no liabilities on June 30. Roe's distributive share of partnership income up to June 30 is $22,500. Roe acquired his interest in the partnership five years ago. Roe will have a long- term capital gain on the sale of his interest of $22,500. 
C)  Section 751 assets include all inventory and all unrealized receivables in a sale or exchange situation. 
D)  Statements B and C are true.

Question 12

Rod owns a 65% interest in the RRR Partnership, a general partnership, which he sells to the two remaining partners - Roger and Regis. The three partners have agreed that Rod will receive $160,000 in cash from the sale. Rod's basis in the partnership interest before the sale is $125,000, which includes his $35,000 share of partnership recourse liabilities. The partnership has assets with a $310,000 FMV and a $210,000 adjusted basis. What issues should Rod, Roger, and Regis consider before this sale takes place?

Accepted Answer

Roger and Regis should consider the foll

Question 13

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 14

What is an electing large partnership? What are the advantages to the partnership of electing to be taxed under the electing large partnership rules?

Accepted Answer

An electing large partnership is a partn

Question 15

The Principle Limited Partnership has more than 300 partners and is publicly traded. The Principle was grandfathered under the 1987 Tax Act and has consistently been taxed as a partnership. In the current year, The Principle Limited Partnership will continue to be very profitable and will continue to pay out about 30% of its income to its owners each year. The managing partners of The Principle want to consider the firm's options for taxation in the current and later years.

Accepted Answer

What method should The Principle Limited

Question 16

A limited liability company is a form of business entity that combines the legal benefits of the corporate form with the tax benefits of the partnership form.

Accepted Answer

A) True 
 B)False

Question 17

Sally is a calendar- year taxpayer who owns a 30% capital and profits interest in the SEM Partnership. Eric sells the remaining 70% capital and profits interest to Michelle on October 3. The partnership year- end is March 31 as permitted by the IRS for business purposes. Which of the following statements is correct?

Accepted Answer

A)  Sally must conform her tax year with the partnership tax year. 
B)  The new partnership is a continuation of the old partnership. 
C)  Sally's tax return will include partnership distributive shares for periods ending March 31 and October 3. 
D)  Sally's tax return will include a partnership distributive share only for the period ending March 31. 
A)  Sally must conform her tax year with the partnership tax year. 
B)  The new partnership is a continuation of the old partnership. 
C)  Sally's tax return will include partnership distributive shares for periods ending March 31 and October 3. 
D)  Sally's tax return will include a partnership distributive share only for the period ending March 31.

Question 18

Jerry has a $50,000 basis for his interest in JJ Partnership before receiving a current distribution consisting of
$8,000 in money, accounts receivable having a zero basis to the partnership, and land having a $28,000 basis to the partnership. What will Jerry's basis be in these assets?

Accepted Answer

Generally, the partner's basis

Question 19

What is the definition of "substantially appreciated inventory"?

Accepted Answer

A)  inventory and unrealized receivables with a FMV greater than their basis 
B)  inventory and unrealized receivables with a FMV greater than 120% of their basis 
C)  inventory with a FMV greater than its basis 
D)  inventory with a FMV greater than 120% of its basis 
A)  inventory and unrealized receivables with a FMV greater than their basis 
B)  inventory and unrealized receivables with a FMV greater than 120% of their basis 
C)  inventory with a FMV greater than its basis 
D)  inventory with a FMV greater than 120% of its basis

Question 20

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

Identify which of the following statements is true.

Under Sec. 751, unrealized receivables include potential Section 1245 or 1250 recapture on the partnership's depreciable property.

The XYZ Partnership owns the following assets on December 31: By how much must XYZ reduce its unrealized receivables to avoid meeting the substantially apprec inventory test?

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?

Under the check- the- box rules, an LLC with more than one member is taxed as a partnership unless it elects to be taxed as a corporation.

A partnership cannot recognize a gain or loss on a current distribution.

The Tandy Partnership owns the following assets on December 31: Is the partnership's inventory considered to be substantially appreciated for purposes of Sec. 751? Show your work.

Do most distributions made by a partnership require a Sec. 751 calculation?

Identify which of the following statements is false.

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

What is an electing large partnership? What are the advantages to the partnership of electing to be taxed under the electing large partnership rules?

A limited liability company is a form of business entity that combines the legal benefits of the corporate form with the tax benefits of the partnership form.

Jerry has a $50,000 basis for his interest in JJ Partnership before receiving a current distribution consisting of $8,000 in money, accounts receivable having a zero basis to the partnership, and land having a $28,000 basis to the partnership. What will Jerry's basis be in these assets?

What is the definition of "substantially appreciated inventory"?

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

Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals

Filters

Exam 10: Special Partnership Issues

Identify which of the following statements is true.

Under Sec. 751, unrealized receivables include potential Section 1245 or 1250 recapture on the partnership's depreciable property.

The XYZ Partnership owns the following assets on December 31: By how much must XYZ reduce its unrealized receivables to avoid meeting the substantially apprec inventory test?

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?

Under the check- the- box rules, an LLC with more than one member is taxed as a partnership unless it elects to be taxed as a corporation.

A partnership cannot recognize a gain or loss on a current distribution.

The Tandy Partnership owns the following assets on December 31: Is the partnership's inventory considered to be substantially appreciated for purposes of Sec. 751? Show your work.

Do most distributions made by a partnership require a Sec. 751 calculation?

Identify which of the following statements is false.

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

What is an electing large partnership? What are the advantages to the partnership of electing to be taxed under the electing large partnership rules?

A limited liability company is a form of business entity that combines the legal benefits of the corporate form with the tax benefits of the partnership form.

Jerry has a $50,000 basis for his interest in JJ Partnership before receiving a current distribution consisting of $8,000 in money, accounts receivable having a zero basis to the partnership, and land having a $28,000 basis to the partnership. What will Jerry's basis be in these assets?

What is the definition of "substantially appreciated inventory"?

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

Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals

Filters