Question 1

Match each of the following statements with the numbered terms below that provide the best definition.
-Entity concept

Accepted Answer

A) Organizational choice of many large accounting firms. 
B) Partner's percentage allocation of current operating income. 
C) Might affect any two partners' tax liabilities in different ways. 
D) Partnership in which partners are liable only for any partner's malpractice. 
E) Amount that might be reported on either form 1065, page 1 or, on Schedule K.
F)Transfer of asset to partnership followed by immediate distribution of cash to partner.
G)Must have at least one general and one limited partner.
H)Long-term capital gain might be recharacterized as ordinary income.
I)All partners are jointly and severally liable for entity debts.
J)Theory treating the partner and partnership as separate economic units.
K)Partner's basis in partnership interest after tax-free contribution of asset to partnership.
L)Partnership's basis in asset after tax-free contribution of asset to partnership.
M)One way to calculate a partner's economic interest in the partnership.
N)Owners are members.
O)Theory treating the partnership as a collection of taxpayers joined in an agency relationship.
P)Participates in management.
Q)Not liable for entity debts.
R)No correct match provided. 
A) Organizational choice of many large accounting firms. 
B) Partner's percentage allocation of current operating income. 
C) Might affect any two partners' tax liabilities in different ways. 
D) Partnership in which partners are liable only for any partner's malpractice. 
E) Amount that might be reported on either form 1065, page 1 or, on Schedule K.
F)Transfer of asset to partnership followed by immediate distribution of cash to partner.
G)Must have at least one general and one limited partner.
H)Long-term capital gain might be recharacterized as ordinary income.
I)All partners are jointly and severally liable for entity debts.
J)Theory treating the partner and partnership as separate economic units.
K)Partner's basis in partnership interest after tax-free contribution of asset to partnership.
L)Partnership's basis in asset after tax-free contribution of asset to partnership.
M)One way to calculate a partner's economic interest in the partnership.
N)Owners are members.
O)Theory treating the partnership as a collection of taxpayers joined in an agency relationship.
P)Participates in management.
Q)Not liable for entity debts.
R)No correct match provided.

Question 2

Michelle receives a proportionate liquidating distribution when the basis of her partnership interest is $50,000. The distribution consists of $58,000 cash and noninventory property (adjusted basis to the partnership of $10,000 and fair market value of $12,000). The partnership has no hot assets. How much gain or loss does Michelle recognize, and what is her basis in the distributed property?

Accepted Answer

A)  $0 gain or loss; $10,000 basis in property. 
B)  $0 gain or loss; $50,000 basis in property. 
C)  $8,000 ordinary income; $0 basis in property. 
D)  $8,000 capital gain; $10,000 basis in property. 
E)  $8,000 capital gain; $0 basis in property. 
A)  $0 gain or loss; $10,000 basis in property. 
B)  $0 gain or loss; $50,000 basis in property. 
C)  $8,000 ordinary income; $0 basis in property. 
D)  $8,000 capital gain; $10,000 basis in property. 
E)  $8,000 capital gain; $0 basis in property.

Question 3

An example of the aggregate concept of partnership taxation is that the partnership makes elections related to depreciation, tax credit calculations (except the foreign tax credit), and whether to claim a § 179 deduction.

Accepted Answer

A) True 
 B)False

Question 4

In a proportionate liquidating distribution, Sara receives a distribution of $40,000 cash, accounts receivable (basis of $0, fair market value of $30,000), and inventory (basis of $50,000, fair market value of $60,000). Her basis in the entity immediately before the distribution was $120,000. As a result of the distribution, what is Sara's basis in the accounts receivable and inventory, and how much gain or loss does she recognize?

Accepted Answer

A)  $0 basis in accounts receivable; $50,000 basis in inventory; $30,000 loss. 
B)  $0 basis in accounts receivable; $80,000 basis in inventory; $0 gain or loss. 
C)  $40,000 basis in accounts receivable; $40,000 basis in inventory; $0 gain or loss. 
D)  $30,000 basis in accounts receivable; $50,000 basis in inventory; $30,000 loss. 
E)  $30,000 basis in accounts receivable; $60,000 basis in inventory; $10,000 gain. 
A)  $0 basis in accounts receivable; $50,000 basis in inventory; $30,000 loss. 
B)  $0 basis in accounts receivable; $80,000 basis in inventory; $0 gain or loss. 
C)  $40,000 basis in accounts receivable; $40,000 basis in inventory; $0 gain or loss. 
D)  $30,000 basis in accounts receivable; $50,000 basis in inventory; $30,000 loss. 
E)  $30,000 basis in accounts receivable; $60,000 basis in inventory; $10,000 gain.

Question 5

The BR LLC owns an unrealized receivable with a basis of $0 and fair market value of $200,000 plus cash of $200,000. If BREE distributes $20,000 of the receivable to 50% member Brenda and $20,000 of cash to 50%
Member Renee, which one of the following statements is true?

Accepted Answer

A)  Brenda recognizes $20,000 of capital gain. 
B)  The partnership recognizes $20,000 of ordinary income. 
C)  Renee recognizes $10,000 of ordinary income. 
D)  Brenda recognizes $10,000 of ordinary income. 
E)  Because both partners receive the same value, none of the parties recognizes gross income. 
A)  Brenda recognizes $20,000 of capital gain. 
B)  The partnership recognizes $20,000 of ordinary income. 
C)  Renee recognizes $10,000 of ordinary income. 
D)  Brenda recognizes $10,000 of ordinary income. 
E)  Because both partners receive the same value, none of the parties recognizes gross income.

Question 6

On the formation of a partnership, when might a disguised sale occur? How can this treatment be avoided?

Accepted Answer

A disguised sale might occur when a part

Question 7

Connie owns a one-third capital and profits interest in the calendar year CAB Partnership. Her adjusted basis for her partnership interest was $120,000 when she received a proportionate current (nonliquidating) distribution of the following assets.

a. Calculate Connie's recognized gain or loss on the distribution if any.
b. Calculate Connie's basis in the land received.
c. Calculate Connie's basis for her partnership interest after the distribution.

Accepted Answer

basis.
b. $0 basis in land. The cash dis

Question 8

In a proportionate current (nonliquidating) distribution of his 30% interest in the MNO LLC, Neil received cash
($60,000), land (basis of $40,000 and value of $75,000), and unrealized receivables (basis of $0 and value of
$22,000). In addition, Neil is relieved of his $40,000 share of the LLC's liabilities. Neil's basis in MNO (including his share of LLC liabilities) was $80,000 immediately prior to this distribution.

a. How much gain or loss does Neil recognize on this distribution?
b. What is Neil's basis in the receivables and land he receives in the distribution?
c. What is Neil's basis in the LLC interest following the distribution?

Accepted Answer

partnership interest is reduced to $0 af

Question 9

MNO Partnership has three equal partners. Moon, Inc. and Neptune, Inc. each have fiscal years ending March 31.
Omega uses the calendar year. MNO's required taxable year-end is March 31 under the majority partner rule.

Accepted Answer

A) True 
 B)False

Question 10

What are syndication costs, and how are they treated for tax purposes?

Accepted Answer

Syndication costs are costs incurred in

Question 11

Match each of the following statements with the numbered terms below that provide the best definition.
-Limited liability partnership

Accepted Answer

A) Organizational choice of many large accounting firms. 
B) Partner's percentage allocation of current operating income. 
C) Might affect any two partners' tax liabilities in different ways. 
D) Partnership in which partners are liable only for any partner's malpractice. 
E) Amount that might be reported on either form 1065, page 1 or, on Schedule K.
F)Transfer of asset to partnership followed by immediate distribution of cash to partner.
G)Must have at least one general and one limited partner.
H)Long-term capital gain might be recharacterized as ordinary income.
I)All partners are jointly and severally liable for entity debts.
J)Theory treating the partner and partnership as separate economic units.
K)Partner's basis in partnership interest after tax-free contribution of asset to partnership.
L)Partnership's basis in asset after tax-free contribution of asset to partnership.
M)One way to calculate a partner's economic interest in the partnership.
N)Owners are members.
O)Theory treating the partnership as a collection of taxpayers joined in an agency relationship.
P)Participates in management.
Q)Not liable for entity debts.
R)No correct match provided. 
A) Organizational choice of many large accounting firms. 
B) Partner's percentage allocation of current operating income. 
C) Might affect any two partners' tax liabilities in different ways. 
D) Partnership in which partners are liable only for any partner's malpractice. 
E) Amount that might be reported on either form 1065, page 1 or, on Schedule K.
F)Transfer of asset to partnership followed by immediate distribution of cash to partner.
G)Must have at least one general and one limited partner.
H)Long-term capital gain might be recharacterized as ordinary income.
I)All partners are jointly and severally liable for entity debts.
J)Theory treating the partner and partnership as separate economic units.
K)Partner's basis in partnership interest after tax-free contribution of asset to partnership.
L)Partnership's basis in asset after tax-free contribution of asset to partnership.
M)One way to calculate a partner's economic interest in the partnership.
N)Owners are members.
O)Theory treating the partnership as a collection of taxpayers joined in an agency relationship.
P)Participates in management.
Q)Not liable for entity debts.
R)No correct match provided.

Match each of the following statements with the numbered terms below that provide the best definition. -Entity concept

An example of the aggregate concept of partnership taxation is that the partnership makes elections related to depreciation, tax credit calculations (except the foreign tax credit), and whether to claim a § 179 deduction.

The BR LLC owns an unrealized receivable with a basis of $0 and fair market value of $200,000 plus cash of $200,000. If BREE distributes $20,000 of the receivable to 50% member Brenda and $20,000 of cash to 50% Member Renee, which one of the following statements is true?

On the formation of a partnership, when might a disguised sale occur? How can this treatment be avoided?

MNO Partnership has three equal partners. Moon, Inc. and Neptune, Inc. each have fiscal years ending March 31. Omega uses the calendar year. MNO's required taxable year-end is March 31 under the majority partner rule.

What are syndication costs, and how are they treated for tax purposes?

Match each of the following statements with the numbered terms below that provide the best definition. -Limited liability partnership

Understanding and Working With the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters

Exam 21: Partnerships

Match each of the following statements with the numbered terms below that provide the best definition. -Entity concept

An example of the aggregate concept of partnership taxation is that the partnership makes elections related to depreciation, tax credit calculations (except the foreign tax credit), and whether to claim a § 179 deduction.

The BR LLC owns an unrealized receivable with a basis of $0 and fair market value of $200,000 plus cash of $200,000. If BREE distributes $20,000 of the receivable to 50% member Brenda and $20,000 of cash to 50% Member Renee, which one of the following statements is true?

On the formation of a partnership, when might a disguised sale occur? How can this treatment be avoided?

MNO Partnership has three equal partners. Moon, Inc. and Neptune, Inc. each have fiscal years ending March 31. Omega uses the calendar year. MNO's required taxable year-end is March 31 under the majority partner rule.

What are syndication costs, and how are they treated for tax purposes?

Match each of the following statements with the numbered terms below that provide the best definition. -Limited liability partnership

Understanding and Working With the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters