Exam 10: Partnership Taxation

Phil and Bill each own a 50 percent interest in P&B Interests. P&B Interests has ordinary income for the year of $35,000 before guaranteed payments to Phil. If Phil receives guaranteed payments of $20,000 during the tax year, what is the total income or loss that should be reported by Bill from the partnership for this tax year?

Salix Associates is a partnership with an October 31 year-end. For the fiscal year ended October 31, 2019, Salix Associates reported ordinary income of $100,000, after deducting guaranteed payments. Max, a calendar year taxpayer, is a 30 percent partner in the partnership and received $2,000 monthly as a guaranteed payment for the calendar year 2018, and $2,100 monthly for the calendar year 2019. What is the total income from the partnership that Max should report on his 2019 individual income tax return?

Which of the following liabilities would be considered nonrecourse?

Which one of the following is not true about partnerships?

Income from a partnership is taxed to the partner only if the partner receives the income as a distribution during the year.

Jack and Jill decided to pool their money and start a water delivery business. Since they trust each other so much, they did not draw up any legal documents for the business. During the first year of business, they earned $50,000 which was net of $10,000 paid to Jill as a guaranteed payment. During the second year of business, they decided to limit their liability exposure by forming an LLC. a. Was a partnership formed during the first year? b. If a partnership was formed, how much income will be taxed at the partnership level? c. For the second year, do they need to file a partnership tax return?

A partnership generally must adopt the same tax year as its majority partners.

A partner contributes assets with a basis of $50,000 and a fair market value of $80,000 to a partnership. What is the basis of the property to the partnership and what is the general rule for the basis of appreciated property contributed to a partnership?

Jamie decides to contribute cash and property to a partnership she and her friends started. She contributes a building worth $260,000 that has an adjusted basis of $100,000 and she also contributes $40,000 in cash. What is her basis in the partnership?

Barbara receives a current distribution consisting of $2,000 cash plus other property with an adjusted basis to the partnership of $2,300 and a fair market value on the date of the distribution of $7,000. Barbara has a 10 percent interest in the partnership and her basis in her partnership interest, immediately prior to the distribution, is $5,000. What is Barbara's basis in the noncash property received in the current distribution?

An equal partnership is formed by Rita and Gerry. Rita contributes cash of $10,000 and a building with a fair market value of $150,000, adjusted basis of $55,000, and subject to a liability of $60,000. Gerry contributes cash of $100,000. What amount of gain must Rita recognize as a result of this transaction?

Cooke and Thatcher form the C&T Partnership. Cooke contributes equipment with a fair market value of $70,000 and a basis of $35,000, in exchange for a 70 percent interest in the partnership capital and profits. Thatcher performs services worth $30,000 for the partnership in exchange for a 30 percent interest in capital and profits. ​ a.What is the amount of Cooke'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 Cooke's basis in his partnership interest immediately after the contribution? c.What is the amount of Thatcher's recognized income or loss (if any) on the contribution to the partnership? d.What is Thatcher's basis in her partnership interest immediately after the contribution? e.What is C&T Partnership's basis in the equipment received from Cooke?

On July 1 of the current year, Ambrose was admitted to the partnership of Ambrose and Nectar. His contribution to capital consisted of 500 shares of stock in Paniculata Corporation, which he bought in 2015 for $10,000 and which had a fair market value of $50,000 on July 1 of the current year. Ambrose's interest in the partnership's capital and profits is 25 percent. On July 1 of the current year, the fair market value of the partnership's net assets (after Ambrose was admitted) was $200,000. What is Ambrose's taxable gain in the current year on the exchange of stock for his partnership interest?

Owen owns 60 percent of the Big Time partnership. He sells to the partnership a machine for $70,000 that has a $45,000 basis. What would the taxable income be for Owen and what is the partnership's basis in the machine?

Kitty is a 60 percent partner of Tabby Associates. Kitty sells a building to the partnership for $75,000. If the building had an adjusted basis to Kitty of $95,000, how much gain or loss does Kitty recognize on this transaction?

Partnership losses that are not used because a partner's basis in the partnership interest is zero may not be carried forward and are lost by the partner.

An equal partnership is formed by Rita and Gerry. Rita contributes cash of $10,000 and a building with a fair market value of $150,000, adjusted basis of $55,000, and subject to a liability of $60,000. Gerry contributes cash of $100,000. What is Rita's basis in her partnership interest immediately after formation of the partnership?

Which of the following statements is true about partnerships?

If Margo and Bruce purchase and operate an ice cream store, for tax purposes they have formed a partnership.

Jordan files his income tax return on a calendar-year basis. He is the principal partner of a partnership reporting on a June 30 fiscal year end basis. Jordan's share of the partnership's ordinary income was $24,000 for the fiscal year ended June 30, 2019, and $72,000 for the fiscal year ended June 30, 2020. How much should Jordan report on his 2019 individual income tax return as his share of taxable income from the partnership?