Question 1

A partner's basis for his or her partnership interest is increased by his share of the partnership's tax-exempt income.

Accepted Answer

A) True 
 B)False

Question 2

Clark and Lewis are partners who share the profits and losses of the C&L Partnership 60% and 40%, respectively. The tax basis of each partner's interest in the partnership as of December 31 of last year was as follows: Clark, $14,000; Lewis, $12,000. During the current year, the partnership had ordinary income of $20,000 and a long-term capital loss of $10,000 from the sale of securities. The partnership made cash distributions proportionately to the two partners during this year totaling $20,000. What is the amount of Lewis's tax basis of his partnership interest on December 31 of the current year?

Accepted Answer

Lewis's basis = $12,

Question 3

Bao had investment land that he purchased in 1990 for $80,000. Two years ago, when the land was contributed to a partnership, the FMV was $50,000. The land is inventory in the hands of the partnership. The partnership then sells the land in the current year for $46,000. The partnership's recognized loss is

Accepted Answer

A) a $34,000 capital loss. 
B) a $34,000 ordinary loss. 
C) a $30,000 capital loss and a $4,000 ordinary loss. 
D) a $4,000 capital loss and a $30,000 ordinary loss. 
A) a $34,000 capital loss. 
B) a $34,000 ordinary loss. 
C) a $30,000 capital loss and a $4,000 ordinary loss. 
D) a $4,000 capital loss and a $30,000 ordinary loss.

Question 4

On January 2 of the current year, Calloway and Taylor contribute cash equally to form the CT Partnership. Calloway and Taylor share profits and losses in a ratio of 75% and 25%, respectively. The partnership's ordinary income for the year was $40,000. Calloway received a distribution of $5,000 during the year. What is Calloway's share of taxable income for the year?

Accepted Answer

A) $5,000 
B) $10,000 
C) $20,000 
D) $30,000 
A) $5,000 
B) $10,000 
C) $20,000 
D) $30,000

Question 5

Brent is a general partner in BC Partnership. His distributive share of partnership income and his guaranteed payment for the year are as follows:   What is his self-employment income?

Accepted Answer

A) $84,000 
B) $66,000 
C) $48,000 
D) $36,000 
A) $84,000 
B) $66,000 
C) $48,000 
D) $36,000

Question 6

Rashad contributes a machine having a basis of $30,000 and an FMV of $25,000 to a partnership in exchange for a 20% interest in partnership capital, profits, and losses. Prior to the contribution, the partnership had recourse liabilities of $20,000. The partnership assumes a $20,000 recourse liability that is owed by Rashad on the machine. Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses. Rashad's basis in his partnership interest is

Accepted Answer

A) $11,000. 
B) $18,000. 
C) $22,000. 
D) $34,000. 
A) $11,000. 
B) $18,000. 
C) $22,000. 
D) $34,000.

Question 7

Victor and Kristina decide to form VK Partnership. They will be equal partners. Victor contributes a building with a $150,000 FMV and a $105,000 adjusted basis to the partnership. The building has a $60,000 mortgage, which the partnership assumes. Kristina contributes land with a $70,000 FMV and a $95,000 adjusted basis. Kristina will manage the day-to-day activities of the partnership. She will begin to receive a guaranteed payment for her work, starting in the second year of operations, and continuing on as long as she manages the operations of the partnership. Victor and Kristina have agreed that the guaranteed payment will be $10,000 per year. What tax issues should Victor, Kristina, and the partnership consider with respect to the formation and operation of the partnership?

Accepted Answer

• Does Victor recognize any gain on the

Question 8

Identify which of the following statements is true.

Accepted Answer

A) When adjusting a partner's basis in a partnership interest, the negative basis adjustments are made prior to the positive basis adjustments. 
B) Martin and Carlos formed an equal partnership to which Martin contributed $10,000 cash and Carlos contributed a building worth $10,000 with a basis of $2,000. In the first year of operation, the partnership suffered a $10,000 ordinary loss. Martin and Carlos can each deduct a $5,000 loss on their personal tax returns. 
C) Any distributive share of a loss that cannot be deducted by a partner because of the Sec. 704(d)basis loss limitation is permanently lost. 
D) All of the above are false. 
A) When adjusting a partner's basis in a partnership interest, the negative basis adjustments are made prior to the positive basis adjustments. 
B) Martin and Carlos formed an equal partnership to which Martin contributed $10,000 cash and Carlos contributed a building worth $10,000 with a basis of $2,000. In the first year of operation, the partnership suffered a $10,000 ordinary loss. Martin and Carlos can each deduct a $5,000 loss on their personal tax returns. 
C) Any distributive share of a loss that cannot be deducted by a partner because of the Sec. 704(d)basis loss limitation is permanently lost. 
D) All of the above are false.

Question 9

What is the tax impact of guaranteed payments on the partner and the partnership?

Accepted Answer

The partner recognizes ordinary income i

Question 10

Identify which of the following statements is true.

Accepted Answer

A) A partner who performs services for a partnership is usually not considered an employee of the partnership. 
B) It may be necessary for the partnership to capitalize a partner's guaranteed payment. 
C) Guaranteed payments are ordinary income to the recipient. 
D) All of the above are true. 
A) A partner who performs services for a partnership is usually not considered an employee of the partnership. 
B) It may be necessary for the partnership to capitalize a partner's guaranteed payment. 
C) Guaranteed payments are ordinary income to the recipient. 
D) All of the above are true.

Question 11

Guaranteed payments are always ordinary income to the recipient.

Accepted Answer

A) True 
 B)False

Question 12

Identify which of the following statements is true.

Accepted Answer

A) A partnership cannot have an NOL carryback or carryforward. 
B) A partnership cannot make charitable contributions. 
C) Dividends received by a partnership from a domestic corporation are included in the partnership's ordinary income. 
D) All of the above are false. 
A) A partnership cannot have an NOL carryback or carryforward. 
B) A partnership cannot make charitable contributions. 
C) Dividends received by a partnership from a domestic corporation are included in the partnership's ordinary income. 
D) All of the above are false.

Question 13

Yong contributes a machine having an adjusted basis of $20,000 and an FMV of $25,000 for a 10% partnership interest. Yong had taken $10,000 of depreciation prior to the contribution. The partnership has no liabilities. As a result of the contribution, Yong must recognize

Accepted Answer

A) no gain or loss. 
B) a $5,000 Sec. 1245 gain. 
C) a $5,000 capital gain. 
D) $10,000 ordinary income. 
A) no gain or loss. 
B) a $5,000 Sec. 1245 gain. 
C) a $5,000 capital gain. 
D) $10,000 ordinary income.

Question 14

What are the three rules and their order when determining a partnership tax year?

Accepted Answer

First, the partnership tax year will be

Question 15

Identify which of the following statements is true.

Accepted Answer

A) Tax-exempt interest received by a partnership is taxable to the partners if distributed. 
B) Partnership gains and losses from two different casualty and theft occurrences in one year are passed through to the partners as two separate items. 
C) The amount and character of any gains/losses are determined at the partnership level. 
D) All of the above are false. 
A) Tax-exempt interest received by a partnership is taxable to the partners if distributed. 
B) Partnership gains and losses from two different casualty and theft occurrences in one year are passed through to the partners as two separate items. 
C) The amount and character of any gains/losses are determined at the partnership level. 
D) All of the above are false.

Question 16

In January, Daryl and Louis form a partnership with each contributing $75,000 in cash. The partnership agreement provides that Daryl would receive a guaranteed payment for salary of $20,000 and that partnership profits and losses (computed after deducting Daryl's salary)would be shared equally. For the year, the partnership's operations result in an $18,000 ordinary loss after payment of Daryl's guaranteed payment. The partnership has no outstanding liabilities at year-end. What is the basis amount of Daryl's partnership interest at year-end?

Accepted Answer

Daryl's basis would be unaffec

Question 17

Identify which of the following statements is true.

Accepted Answer

A) A contribution of services for a partnership interest is a tax-free transaction. 
B) For federal income tax purposes, formation of a partnership is governed by Sec. 721. 
C) When a partnership assumes a liability on property contributed by a partner, the only effect on the contributing partner's basis in his or her partnership interest is that his or her basis will be increased by the amount of the liability assumed by the other partners. 
D) All of the above are false. 
A) A contribution of services for a partnership interest is a tax-free transaction. 
B) For federal income tax purposes, formation of a partnership is governed by Sec. 721. 
C) When a partnership assumes a liability on property contributed by a partner, the only effect on the contributing partner's basis in his or her partnership interest is that his or her basis will be increased by the amount of the liability assumed by the other partners. 
D) All of the above are false.

Question 18

Jane contributes land with an FMV of $100,000 and a basis of $40,000 to the Green Partnership in exchange for a 25% partnership interest. The partnership assumes the $80,000 mortgage on the land. Mary has a 25% share of partnership liabilities. The Green Partnership has $8,000 in liabilities immediately before Jane's contribution. What is Jane's basis in her partnership interest?

Accepted Answer

@#IMG-DLM& The cash deemed distributed in excess o

Question 19

Mario contributes inventory to a partnership on August 1 of this year in exchange for a 20% partnership interest. Mario had purchased the inventory on July 2 of last year. His holding period for the partnership interest begins

Accepted Answer

A) July 2 of last year. 
B) July 3 of last year. 
C) August 1 of the current year. 
D) August 2 of the current year. 
A) July 2 of last year. 
B) July 3 of last year. 
C) August 1 of the current year. 
D) August 2 of the current year.

Question 20

No gain is recognized on the sale of property between a partnership and a more-than-50% partner.

Accepted Answer

A) True 
 B)False

A partner's basis for his or her partnership interest is increased by his share of the partnership's tax-exempt income.

Brent is a general partner in BC Partnership. His distributive share of partnership income and his guaranteed payment for the year are as follows: What is his self-employment income?

Identify which of the following statements is true.

What is the tax impact of guaranteed payments on the partner and the partnership?

Identify which of the following statements is true.

Guaranteed payments are always ordinary income to the recipient.

Identify which of the following statements is true.

Yong contributes a machine having an adjusted basis of $20,000 and an FMV of $25,000 for a 10% partnership interest. Yong had taken $10,000 of depreciation prior to the contribution. The partnership has no liabilities. As a result of the contribution, Yong must recognize

What are the three rules and their order when determining a partnership tax year?

Identify which of the following statements is true.

Identify which of the following statements is true.

Mario contributes inventory to a partnership on August 1 of this year in exchange for a 20% partnership interest. Mario had purchased the inventory on July 2 of last year. His holding period for the partnership interest begins

No gain is recognized on the sale of property between a partnership and a more-than-50% partner.

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

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

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Exam 9: Partnership Formation and Operation

A partner's basis for his or her partnership interest is increased by his share of the partnership's tax-exempt income.

Brent is a general partner in BC Partnership. His distributive share of partnership income and his guaranteed payment for the year are as follows: What is his self-employment income?

Identify which of the following statements is true.

What is the tax impact of guaranteed payments on the partner and the partnership?

Identify which of the following statements is true.

Guaranteed payments are always ordinary income to the recipient.

Identify which of the following statements is true.

Yong contributes a machine having an adjusted basis of $20,000 and an FMV of $25,000 for a 10% partnership interest. Yong had taken $10,000 of depreciation prior to the contribution. The partnership has no liabilities. As a result of the contribution, Yong must recognize

What are the three rules and their order when determining a partnership tax year?

Identify which of the following statements is true.

Identify which of the following statements is true.

Mario contributes inventory to a partnership on August 1 of this year in exchange for a 20% partnership interest. Mario had purchased the inventory on July 2 of last year. His holding period for the partnership interest begins

No gain is recognized on the sale of property between a partnership and a more-than-50% partner.

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

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters