Exam 10: Partnership Taxation

The "at-risk" rule applies, with limited exceptions, to all taxable activities.

Which of the following items must be reported separately from ordinary income or loss on a partnership return?

Please answer the following questions: a.What form is used to report income and expenses from a partnership? b.If a partner's basis at the beginning of the year is $1,000 and the partnership allocates $7,000 of loss to the partner: how much of the loss is deductible in the current year; what is his new basis in the partnership; and what happens to any excess loss not deducted? c.What is the exemption amount for a partnership?

Oscar and Frank form an equal partnership, the O and F Partnership. Oscar contributes land with an adjusted basis of $45,000, subject to a mortgage of $100,000, in exchange for a partnership interest worth $250,000. Frank contributes cash of $100,000 and performs services for the partnership in exchange for a partnership interest worth $250,000. a.What is the amount of Oscar's recognized gain or loss (if any) as a result of the contribution to the partnership in exchange for the partnership interest? b.What is Oscar's basis in his partnership interest immediately after the contribution? c.What is the amount of Frank's recognized income or loss (if any) as a result of the receipt of the partnership interest in exchange for the cash and services? d.What is the partnership's basis in the land received from Oscar?

Leslie contributes a building worth $88,000, with an adjusted basis of $40,000, to a partnership in exchange for a 50 percent interest in the partnership's capital and profits. What is the amount of Leslie's basis in her partnership interest immediately after the contribution?

Josh is a 30% partner in the Ghost Partnership. Ghost paid W-2 wages of $100,000 and also made a guaranteed payment to Josh of $20,000. The amount includable as wages in Josh's wage limitation on his QBI deduction is:

Lilac Designs is a partnership with a tax year that ends November 30, 2019. During that year, William, a partner, received $4,000 per month as a guaranteed payment and his share of partnership income after guaranteed payments was $20,000. For December of 2019, William received a guaranteed payment of $10,000. Calculate the amount of income from the partnership that William should report for his tax year ended December 31, 2019.

During the current year, Jay is a partner in an automobile dealership. Jay's amount at risk at the beginning of the year is $90,000, and during the current year Jay's share of the dealership's ordinary loss is $120,000. a.What is the amount of the loss from the automobile dealership that Jay may deduct in the current year? b.If the dealership has a profit of $63,000 in the subsequent year, how much of the subsequent year income is taxable to Jay?

For the following separate, independent situations indicate with a "Yes" if a partnership return needs to be filed. Mark with a "No" if a partnership return is not required. a. Tony and Gina form a joint venture to import goods from South Korea. b. Nancy decided to start her own private investigative business. c. Uncle Pennybag's estate assets are pooled together until they can be distributed to the beneficiaries. d. Howie, Dewey, and Cheatem form an LLC. e. Flora, Fauna, and Merryweather start a child care business. No official documents are drawn up.

Sabrina contributes a building with an adjusted basis of $80,000 to a partnership. The fair market value of the building is $100,000 on the date of the contribution. What is Sabrina's basis in her partnership interest immediately after the contribution?

On July 1 of the current year, Bertram acquired a 25 percent interest in Sycamore Company, a partnership, by contributing property with an adjusted basis of $7,000 and a fair market value of $12,000. The property was subject to a mortgage of $8,000, which was assumed by Sycamore Company. What is Bertram's basis in his partnership interest in Sycamore Company immediately after the partnership contribution?

If a partner has a more than 50 percent interest in a partnership, a capital gain resulting from the sale of property by the partner to the partnership will be taxed as ordinary income to the partner, provided the property is not a capital asset to the partnership.

The "at-risk" rule does not apply to activities involving real estate.

List three benefits of an LLC.

Lucky's original contribution to the Boxwood Partnership was land with a basis of $5,000 and a market value of $55,000. Her share of the taxable income from the partnership since her original contribution has been $95,000 and Lucky has received $45,000 in cash distributions from the partnership. Lucky did not recognize any gains as a result of the distributions. Calculate Lucky's current basis in her partnership interest.

Loretta contributes property to a partnership in exchange for a 25 percent partnership interest. The property contributed has a fair market value of $45,000 and a basis of $35,000 on the date of the contribution to the partnership. In addition, Loretta receives a 10 percent partnership interest, valued at $18,000, in exchange for services rendered to the partnership. What is Loretta's basis in her partnership interest, immediately after these transactions?

Cypress Road is a partnership with two partners, Saul, a 60 percent partner, and Robbie, a 40 percent partner. The partnership has income for the year of $100,000 before guaranteed payments to Robbie. Guaranteed payments of $50,000 are paid to Robbie for his management services during the year. Calculate the amount of income that should be reported by Saul and Robbie from the partnership for the year. Saul should report income of $__________. Robbie should report income of $__________.

Under which of the following circumstances would a partnership terminate and close its tax year?

Partnership income is taxed at the same tax rates as the income of corporations.

The partnership of Truman and Hanover realized the following items of income during the current tax year: Net income from operations \ 65,000 Dividends received from domestic corporations 4,000 Interest income on corporate bonds 3,000 Net long-term capital gains 5,000 Net short-term capital gains 1,000 Both the partners are on a calendar year basis. What is the total income which should be reported as ordinary income from business activities of the partnership for the current tax year?