Question 1

A partner's receipt of guaranteed payments is a form of qualified business income.

Accepted Answer

A) True 
 B)False

Question 2

Assuming that a partnership normally has a calendar year-end, what should the tax year-end be in the following independent cases?
a. Jim, a 70 percent partner, sells his partnership interest to Fred on August 10.
b. On July 13, the partnership sells its office building and moves its business across town.
c. June buys a 15 percent interest in the partnership on May 14.
d. The partnership goes out of business on February 26.

Accepted Answer

a. The partnership's tax year-

Question 3

The basis of a partner's interest in a partnership is increased by losses of the partnership allocated to the partner.

Accepted Answer

A) True 
 B)False

Question 4

A partnership will terminate and its tax year will close if the partnership ceases to carry on any business activity.

Accepted Answer

A) True 
 B)False

Question 5

Guaranteed payments made by a partnership must be made to individuals other than partners in the partnership.

Accepted Answer

A) True 
 B)False

Question 6

A partnership reports its income on Form 1040.

Accepted Answer

A) True 
 B)False

Question 7

Barry owns a 50 percent interest in B&B Interests, a partnership. His brother, Benny, owns a 35 percent interest in that same partnership, and the remaining 15 percent is owned by an unrelated individual. During the current year, Barry sells a rental property with a basis of $60,000 to B&B Interests for $100,000. The partnership intends to hold the rental as inventory for resale. What is the amount and nature of Barry's gain or loss on this transaction?

Accepted Answer

A) $40,000 long-term capital loss 
B) $0 gain or loss 
C) $40,000 long-term capital gain 
D) $40,000 ordinary income 
E) None of these 
A) $40,000 long-term capital loss 
B) $0 gain or loss 
C) $40,000 long-term capital gain 
D) $40,000 ordinary income 
E) None of these

Question 8

Guaranteed payments received from a partnership are included in the income of the partner receiving the payments on a cash basis, without regard to the partnership's tax year.
Guaranteed payments received from a partnership are included in the income of the partner receiving the payments on a cash basis, without regard to the partnership's tax year.Guaranteed payments received from a partnership are included in the income of the partner receiving the payments on a cash basis, without regard to the partnership's tax year.

Accepted Answer

A) True 
 B)False

Question 9

The tax year of a partnership generally closes upon entry of a new 20% partner.

Accepted Answer

A) True 
 B)False

Question 10

The holding period of property contributed to a partnership includes the period of time that the contributor has held the property.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements about partnerships is true?

Accepted Answer

A) Partnerships must file their tax returns on a calendar year basis. 
B) No gain or loss is ever recognized in transactions between partners and a partnership. 
C) Gain is never recognized by a partner on a contribution of property to a partnership. 
D) A partner's initial basis in a partnership interest is equal to the basis of the property transferred (plus cash contributed) to the partnership, adjusted for any gain recognized on the transfer and reduced for liabilities assumed by the other partners. 
E) The partnership's basis in property contributed by a partner is equal to the fair market value of the property on the date of the transfer. 
A) Partnerships must file their tax returns on a calendar year basis. 
B) No gain or loss is ever recognized in transactions between partners and a partnership. 
C) Gain is never recognized by a partner on a contribution of property to a partnership. 
D) A partner's initial basis in a partnership interest is equal to the basis of the property transferred (plus cash contributed) to the partnership, adjusted for any gain recognized on the transfer and reduced for liabilities assumed by the other partners. 
E) The partnership's basis in property contributed by a partner is equal to the fair market value of the property on the date of the transfer.

Question 12

Which of the following is a not true about an LLC?

Accepted Answer

A) LLCs are not required to have a general partner. 
B) LLC members can participate in the management of the business. 
C) Taxable income and losses pass through to the owners. 
D) An LLC must have at least two members. 
A) LLCs are not required to have a general partner. 
B) LLC members can participate in the management of the business. 
C) Taxable income and losses pass through to the owners. 
D) An LLC must have at least two members.

Question 13

The partnership of Felix and Oscar had the following items of income during the current tax year: $$\begin{array} { l r } 
\text { Income from operations } & \$ 157,000 \
\text { Tax-exempt interest income } & 8,000 \
\text { Dividend income } & 6,000
\end{array}$$ What is the total ordinary income from business activities passed through by the partnership for the current tax year?

Accepted Answer

A) $156,000 
B) $157,000 
C) $165,000 
D) $110,000 
E) None of these 
A) $156,000 
B) $157,000 
C) $165,000 
D) $110,000 
E) None of these

Question 14

In general, income is recognized by the partner when a partnership interest is received in exchange for services rendered to the partnership.

Accepted Answer

A) True 
 B)False

Question 15

Jim's basis in his partnership is $200,000. His share of the current year partnership income is $60,000. The partnership paid him a $75,000 distribution in the current year. What is his new basis in the partnership at the end of the year and what is his taxable income from the partnership?

Accepted Answer

A) $200,000; $75,000 
B) $260,000; $60,000 
C) $140,000; $60,000 
D) $185,000; $60,000 
E) $185,000; $135,000 
A) $200,000; $75,000 
B) $260,000; $60,000 
C) $140,000; $60,000 
D) $185,000; $60,000 
E) $185,000; $135,000

Question 16

Wallace and Pedersen have equal interests in the capital and profits of the partnership of Wallace and Pedersen. They are otherwise unrelated to each other. On August 1, 2019, Wallace sold 100 shares of Kalmia Mining Corporation to the partnership for its fair market value of $7,000. Wallace had bought the stock in 2010 at a cost of $10,000. What is Wallace's deductible loss for 2019 as a result of the sale of this stock?

Accepted Answer

A) $0 
B) $1,500 long-term capital loss 
C) $3,000 long-term capital loss 
D) $3,000 ordinary loss 
E) None of these 
A) $0 
B) $1,500 long-term capital loss 
C) $3,000 long-term capital loss 
D) $3,000 ordinary loss 
E) None of these

Question 17

Limited liability companies may operate in more than one state.

Accepted Answer

A) True 
 B)False

Question 18

Ownership of a partnership interest by a taxpayer's brother is considered indirect ownership by the taxpayer.

Accepted Answer

A) True 
 B)False

Question 19

For tax purposes, in computing the ordinary income of a partnership, a deduction is allowed for:

Accepted Answer

A) Payments to partners, determined without regard to the income of the partnership, for services provided to the partnership. 
B) The net operating loss deduction. 
C) Contributions to charitable organizations. 
D) Personal exemptions of the partners. 
E) None of these 
A) Payments to partners, determined without regard to the income of the partnership, for services provided to the partnership. 
B) The net operating loss deduction. 
C) Contributions to charitable organizations. 
D) Personal exemptions of the partners. 
E) None of these

Question 20

There is no general partner required in a limited liability company (LLC).

Accepted Answer

A) True 
 B)False

A partner's receipt of guaranteed payments is a form of qualified business income.

The basis of a partner's interest in a partnership is increased by losses of the partnership allocated to the partner.

A partnership will terminate and its tax year will close if the partnership ceases to carry on any business activity.

Guaranteed payments made by a partnership must be made to individuals other than partners in the partnership.

A partnership reports its income on Form 1040.

The tax year of a partnership generally closes upon entry of a new 20% partner.

The holding period of property contributed to a partnership includes the period of time that the contributor has held the property.

Which of the following statements about partnerships is true?

Which of the following is a not true about an LLC?

In general, income is recognized by the partner when a partnership interest is received in exchange for services rendered to the partnership.

Jim's basis in his partnership is $200,000. His share of the current year partnership income is $60,000. The partnership paid him a $75,000 distribution in the current year. What is his new basis in the partnership at the end of the year and what is his taxable income from the partnership?

Limited liability companies may operate in more than one state.

Ownership of a partnership interest by a taxpayer's brother is considered indirect ownership by the taxpayer.

For tax purposes, in computing the ordinary income of a partnership, a deduction is allowed for:

There is no general partner required in a limited liability company (LLC).

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses

Additional Income and the Qualified Business Income Deduction

Deductions for and From AGI

Accounting Periods and Other Taxes

Tax Credits

Depreciation and Sale of Business Property

Payroll, Estimated Payments and Retirement Plans

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Exam 10: Partnership Taxation

A partner's receipt of guaranteed payments is a form of qualified business income.

The basis of a partner's interest in a partnership is increased by losses of the partnership allocated to the partner.

A partnership will terminate and its tax year will close if the partnership ceases to carry on any business activity.

Guaranteed payments made by a partnership must be made to individuals other than partners in the partnership.

A partnership reports its income on Form 1040.

The tax year of a partnership generally closes upon entry of a new 20% partner.

The holding period of property contributed to a partnership includes the period of time that the contributor has held the property.

Which of the following statements about partnerships is true?

Which of the following is a not true about an LLC?

In general, income is recognized by the partner when a partnership interest is received in exchange for services rendered to the partnership.

Jim's basis in his partnership is $200,000. His share of the current year partnership income is $60,000. The partnership paid him a $75,000 distribution in the current year. What is his new basis in the partnership at the end of the year and what is his taxable income from the partnership?

Limited liability companies may operate in more than one state.

Ownership of a partnership interest by a taxpayer's brother is considered indirect ownership by the taxpayer.

For tax purposes, in computing the ordinary income of a partnership, a deduction is allowed for:

There is no general partner required in a limited liability company (LLC).

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses

Additional Income and the Qualified Business Income Deduction

Deductions for and From AGI

Accounting Periods and Other Taxes

Tax Credits

Depreciation and Sale of Business Property

Payroll, Estimated Payments and Retirement Plans

The Corporate Income Tax

Tax Administration and Tax Planning

Filters