Question 1

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 2

A partner's holding period for property distributed as a current distribution begins on the date of distribution.

Accepted Answer

A) True 
 B)False

Question 3

If a partnership chooses to form an LLC, under the check- the- box rules, and assuming no elections are made, the entity will be taxed as

Accepted Answer

A)  a C corporation. 
B)  an S corporation. 
C)  a partnership if it has more than one member. 
D)  Unable to determine from the facts presented. 
A)  a C corporation. 
B)  an S corporation. 
C)  a partnership if it has more than one member. 
D)  Unable to determine from the facts presented.

Question 4

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 5

A partner can recognize gain, but not loss, on a liquidating distribution.

Accepted Answer

A) True 
 B)False

Question 6

The Internal Revenue Code includes which of the following assets in the definition of Sec. 751 properties?

Accepted Answer

A)  capital assets 
B)  inventory, which is substantially appreciated 
C)  cash 
D)  Sec. 1231 assets 
A)  capital assets 
B)  inventory, which is substantially appreciated 
C)  cash 
D)  Sec. 1231 assets

Question 7

On December 31, Kate receives a $28,000 liquidating distribution from the KLM Partnership. On that date, Kate's basis in her limited partnership interest is $18,000 (which, of course, includes her share of partnership liabilities). The other partners assume her $6,000 share of liabilities. Just prior to the distribution, the partnership has the following balance sheet. Kate is leaving the partnership but the partnership is continuing.   
What is the amount and character of the gain that Kate must recognize on the liquidating distribution?

Accepted Answer

Divide the payments between Sec. 736(a)

Question 8

The HMS Partnership, a cash method of accounting entity, has the following balance sheet at December 31 of last year:   
Sam, who has a one- third interest in profits, losses, and liabilities, sells his partnership interest to Beverly, for
$77,000 cash on January 1 of this year. Sam's basis in his partnership interest (which, of course, includes a share of partnership liabilities) at the time of the sale was $17,000. In addition, Beverly assumes Sam's share of the partnership liabilities. What is the amount and character of the gain that Sam will recognize from this sale?

Accepted Answer

Amount realized = $77,000 + $10,000 liab

Question 9

Patrick purchases a one- third interest in the PPP partnership for $600,000. The partnership has assets with a value of $1,500,000. PPP has a 754 election in effect. What is the amount of the basis adjustment?

Accepted Answer

A)  $100,000 increase in Patrick's basis in the partnership assets 
B)  $100,000 increase in Patrick's share of the basis in the partnership assets 
C)  $0 
D)  $300,000 increase in the basis of partnership assets 
A)  $100,000 increase in Patrick's basis in the partnership assets 
B)  $100,000 increase in Patrick's share of the basis in the partnership assets 
C)  $0 
D)  $300,000 increase in the basis of partnership assets

Question 10

Two years ago, Tom contributed investment land with a basis of $50,000 and an FMV of $62,000 to the RST Partnership. This year, Tom has a basis in his partnership interest of $53,000 when he receives a current distribution of $14,000 cash and inventory with a basis of $35,000 and an FMV of $52,000. (There is no Sec. 751 exchange in connection with the inventory distribution.) The partnership continues to hold the land Tom contributed. How much gain (if any) must Tom recognize as a result of this distribution?

Accepted Answer

Precontribution gain = $62,000

Question 11

All states have adopted laws providing for limited liability companies. Describe a limited liability company (LLC).

Accepted Answer

An LLC often combines the legal benefits

Question 12

The XYZ Partnership owns the following assets on December 31:   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 13

John 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), and investment land (FMV $7,000, basis $6,000). The partners' relative interest in the Sec. 751 assets do not change as a result of the current distribution. His basis in the land is

Accepted Answer

A)  $7,000. 
B)  $5,000. 
C)  $6,000. 
D)  $10,000. 
A)  $7,000. 
B)  $5,000. 
C)  $6,000. 
D)  $10,000.

Question 14

If a partnership asset with a deferred precontribution gain is distributed within seven years of acquisition in a nonliquidating distribution to a partner who did not contribute the asset, the precontribution gain must be recognized by the contributing partner.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Tony sells his one- fourth interest in the WindyCity Partnership to Bill for $100,000 cash when the partnership's assets are as follows:   The partnership has no liabilities on the sale date. Tony's basis in his partnership interest on the date of the sale is $60,000. What is the allocation of Tony's gain to the assets received?

Accepted Answer

The answer of Tony sells his one- fourth interest in...

Question 17

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 18

Sean, Penelope, and Juan formed the SPJ partnership by each contributing assets with a basis and fair market value of $200,000. In the following year, Penelope sold her one- third interest to Pedro for $225,000. At the time o the sale, the SPJ partnership had the following balance sheet:   Shortly after Pedro became a partner, SPJ sold the land for $475,000. What are the tax consequences of the sale to and the partnership (1) assuming there is no Section 754 election in place, and (2) assuming the partnership has a Section 754 election?

Accepted Answer

(1) The partnership has a $75,000 gain (

Question 19

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 20

The sale of a partnership interest always results in capital gain or loss rather than ordinary income.

Accepted Answer

A) True 
 B)False

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

A partner's holding period for property distributed as a current distribution begins on the date of distribution.

If a partnership chooses to form an LLC, under the check- the- box rules, and assuming no elections are made, the entity will be taxed as

Identify which of the following statements is true.

A partner can recognize gain, but not loss, on a liquidating distribution.

The Internal Revenue Code includes which of the following assets in the definition of Sec. 751 properties?

Patrick purchases a one- third interest in the PPP partnership for $600,000. The partnership has assets with a value of $1,500,000. PPP has a 754 election in effect. What is the amount of the basis adjustment?

All states have adopted laws providing for limited liability companies. Describe a limited liability company (LLC).

The XYZ Partnership owns the following assets on December 31: 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

If a partnership asset with a deferred precontribution gain is distributed within seven years of acquisition in a nonliquidating distribution to a partner who did not contribute the asset, the precontribution gain must be recognized by the contributing partner.

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

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.

The sale of a partnership interest always results in capital gain or loss rather than ordinary income.

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

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

A partner's holding period for property distributed as a current distribution begins on the date of distribution.

If a partnership chooses to form an LLC, under the check- the- box rules, and assuming no elections are made, the entity will be taxed as

Identify which of the following statements is true.

A partner can recognize gain, but not loss, on a liquidating distribution.

The Internal Revenue Code includes which of the following assets in the definition of Sec. 751 properties?

Patrick purchases a one- third interest in the PPP partnership for $600,000. The partnership has assets with a value of $1,500,000. PPP has a 754 election in effect. What is the amount of the basis adjustment?

All states have adopted laws providing for limited liability companies. Describe a limited liability company (LLC).

The XYZ Partnership owns the following assets on December 31: 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

If a partnership asset with a deferred precontribution gain is distributed within seven years of acquisition in a nonliquidating distribution to a partner who did not contribute the asset, the precontribution gain must be recognized by the contributing partner.

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

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.

The sale of a partnership interest always results in capital gain or loss rather than ordinary income.

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