Question 1

Operating distributions terminate a partner's interest in the partnership.

Accepted Answer

A) True 
 B)False  False

Question 2

In the sale of a partnership interest,a selling partner will recognize ordinary income (rather than capital gain)when the partnership assets include cash and land held for 5 years as an investment.

Accepted Answer

A) True 
 B)False  False

Question 3

Jenny has a $54,000 basis in her 50% partnership interest in the JM Partnership before receiving any distributions.This year JM makes a proportionate current distribution to Jenny of a parcel of land with an $80,000 fair value and a $64,000 basis to JM.The land is encumbered with a $30,000 mortgage (JM's only liability).What is Jenny's basis in the land and her remaining basis in JM after the distribution?

Accepted Answer

A)  $80,000 land basis, $0 JM basis. 
B)  $64,000 land basis, $0 JM basis. 
C)  $64,000 land basis, $5,000 JM basis. 
D)  $80,000 land basis, $5,000 JM basis. 
A)  $80,000 land basis, $0 JM basis. 
B)  $64,000 land basis, $0 JM basis. 
C)  $64,000 land basis, $5,000 JM basis. 
D)  $80,000 land basis, $5,000 JM basis. C

Question 4

Kathy is a 25% partner in the KDP Partnership and receives a parcel of land with a fair value of $150,000 (inside basis of $100,000)in complete liquidation of her partnership interest.Kathy's outside basis immediately before the distribution is $200,000.KDP currently has a §754 election in effect and has no hot assets or liabilities.What is KDP's special basis adjustment from the distribution?

Accepted Answer

A)  $0. 
B)  $50,000 step up. 
C)  $100,000 step up. 
D)  $100,000 step down. 
A)  $0. 
B)  $50,000 step up. 
C)  $100,000 step up. 
D)  $100,000 step down.

Question 5

Which of the following is true concerning a partner's basis in assets (other than money)distributed in an operating distribution?

Accepted Answer

A)  A partner's bases in the distributed assets will be greater than the partnership's bases in the assets. 
B)  A partner's bases in the distributed assets will be equal to the partnership's bases in the assets. 
C)  A partner's bases in the distributed assets will be less than or equal to the partnership's bases in the assets. 
D)  None of the statements are true. 
A)  A partner's bases in the distributed assets will be greater than the partnership's bases in the assets. 
B)  A partner's bases in the distributed assets will be equal to the partnership's bases in the assets. 
C)  A partner's bases in the distributed assets will be less than or equal to the partnership's bases in the assets. 
D)  None of the statements are true.

Question 6

Carmello is a one-third partner in the CDW Partnership with equal inside and outside bases.On December 31,Carmello sells his interest to Conrad for $100,000 cash.CDW makes a §754 election and its balance sheet as of December 31 is as follows:
     What is the amount of Conrad's special basis adjustment? If CDW sells the capital asset next year for $300,000,what is the amount of gain Conrad will recognize because of the sale?

Accepted Answer

$40,000 special basis adjustment; $20,00

Question 7

Marcella has a $65,000 basis in her 50% partnership interest in the JM Partnership before receiving any distributions.This year JM makes a proportionate current distribution to Marcella of $10,000 cash and inventory with an $80,000 fair value and a $40,000 basis to JM.What is Marcella's basis in the inventory and her remaining basis in JM after the distribution?

Accepted Answer

A)  $80,000 inventory basis, $0 JM basis. 
B)  $40,000 inventory basis, $0 JM basis. 
C)  $40,000 inventory basis, $15,000 JM basis. 
D)  $80,000 inventory basis, $15,000 JM basis. 
A)  $80,000 inventory basis, $0 JM basis. 
B)  $40,000 inventory basis, $0 JM basis. 
C)  $40,000 inventory basis, $15,000 JM basis. 
D)  $80,000 inventory basis, $15,000 JM basis.

Question 8

Tyson,a one-quarter partner in the TF Partnership,receives a proportionate distribution of $70,000 to liquidate his partnership interest on January 1.Tyson's outside basis is $75,000 including his $10,000 share of TF's liabilities.TF does not hold any hot assets.What is the amount and character of Tyson's recognized gain or loss?

Accepted Answer

$5,000 capital gain.
The gain

Question 9

Nadine Fimple is a one-third partner in the NWL Partnership with equal inside and outside bases.On January 1,NWL distributes $100,000 to Nadine in complete liquidation of her FPL interest.NWL's balance sheet as of January 1 is as follows:
     What is the amount and character of Nadine's recognized gain or loss on the distribution?

Accepted Answer

$40,000 ordinary income.
Nadine's distri

Question 10

The SSC Partnership balance sheet includes the following assets on December 31 of the current year:   Which of SSC's assets are considered hot assets under §751(a)?

Accepted Answer

A)  Cash and accounts receivable. 
B)  Cash and land. 
C)  Accounts receivable and land. 
D)  Accounts receivable and inherent recapture under §1245 in the equipment. 
A)  Cash and accounts receivable. 
B)  Cash and land. 
C)  Accounts receivable and land. 
D)  Accounts receivable and inherent recapture under §1245 in the equipment.

Question 11

Which of the following assets would not be classified as hot assets?

Accepted Answer

A)  Inventory. 
B)  Depreciation recapture. 
C)  Cash. 
D)  Accounts receivable for a cash method taxpayer. 
A)  Inventory. 
B)  Depreciation recapture. 
C)  Cash. 
D)  Accounts receivable for a cash method taxpayer.

Question 12

Heidi and Teresa are equal partners in the HT Partnership.The partners formed the partnership seven years ago by contributing cash.Prior to any distributions,the partners each have a $50,000 basis in their partnership interests.On December 31,the partnership makes a pro-rata operating distribution to Heidi of $60,000 cash.What is the amount and character of Heidi's recognized gain or loss? What is Heidi's remaining basis in HT?

Accepted Answer

$10,000 capital gain; $0 basis in HT.
Se

Question 13

Hot assets include assets except cash,capital assets and §1231 assets.

Accepted Answer

A) True 
 B)False

Question 14

Federico is a 30% partner in the FRM Partnership when he sells his entire interest to Maria for $98,000.At the time of the sale,Federico's basis in FRM is $74,000.FRM does not have any debt.In addition,FRM's assets include accounts receivable with zero tax basis and $21,000 fair market value at the date of the sale.Federico will recognize ordinary income of $24,000 on the sale of his partnership interest.

Accepted Answer

A) True 
 B)False

Question 15

The SSC Partnership balance sheet includes the following assets on December 31 of the current year:   Susan,a 1/3 partner,has an adjusted basis of $90,000 for her partnership interest.If Susan sells her entire partnership interest to Emma for $100,000 cash,what is the amount and character of Susan's gain or loss from the sale?

Accepted Answer

A)  $10,000 capital gain. 
B)  $10,000 ordinary income. 
C)  $20,000 ordinary income; $10,000 capital gain. 
D)  $10,000 capital loss; $20,000 ordinary income. 
A)  $10,000 capital gain. 
B)  $10,000 ordinary income. 
C)  $20,000 ordinary income; $10,000 capital gain. 
D)  $10,000 capital loss; $20,000 ordinary income.

Question 16

Which of the following statements regarding the sale of a partnership interest is false?

Accepted Answer

A)  The seller's primary tax concern in a partnership interest sale is calculating the amount and character of gain or loss on the sale. 
B)  The selling partner determines the gain or loss as the difference between the amount realized and her outside basis in the partnership. 
C)  Hot assets change the character of a gain on the sale from ordinary income to capital gain. 
D)  Any debt relief increases the amount the partner realizes from the sale. 
A)  The seller's primary tax concern in a partnership interest sale is calculating the amount and character of gain or loss on the sale. 
B)  The selling partner determines the gain or loss as the difference between the amount realized and her outside basis in the partnership. 
C)  Hot assets change the character of a gain on the sale from ordinary income to capital gain. 
D)  Any debt relief increases the amount the partner realizes from the sale.

Question 17

At the end of last year,Cynthia,a 20% partner in the five-person CYG partnership,has an outside basis of $30,000 including her $15,000 share of CYG debt.On January 1 of the current year,Cynthia sells her partnership interest to Roger for a cash payment of $22,500 and the assumption of her share of CYG's debt.CYG has no hot assets.What is the amount and character of Cynthia's recognized gain or loss on the sale?

Accepted Answer

A)  $7,500 capital loss. 
B)  $7,500 ordinary loss. 
C)  $7,500 capital gain. 
D)  $7,500 ordinary income. 
A)  $7,500 capital loss. 
B)  $7,500 ordinary loss. 
C)  $7,500 capital gain. 
D)  $7,500 ordinary income.

Question 18

Jaime has a basis in her partnership interest of $50,000 when the partnership distributes (in an operating distribution)two parcels of land to Jaime,each valued at $30,000.The basis in parcel A is $40,000 and the basis in parcel B is $20,000.Jaime allocates $20,000 of basis to parcel A and $30,000 of basis to parcel B.

Accepted Answer

A) True 
 B)False

Question 19

Riley is a 50% partner in the RF Partnership and has an outside basis of $56,000 at the end of the year prior to any distributions.On December 31,Riley receives a proportionate operating distribution of $6,000 cash and a parcel of land with a $14,000 fair value and an $8,000 basis to RF.What is the amount and character of Riley's recognized gain or loss and what is his basis in his partnership interest?

Accepted Answer

A)  $0 gain, $36,000 basis. 
B)  $0 gain, $42,000 basis. 
C)  $0 gain, $50,000 basis. 
D)  $0 gain, $56,000 basis. 
A)  $0 gain, $36,000 basis. 
B)  $0 gain, $42,000 basis. 
C)  $0 gain, $50,000 basis. 
D)  $0 gain, $56,000 basis.

Question 20

A partner's debt relief from the sale of a partnership interest will decrease his outside basis.

Accepted Answer

A) True 
 B)False

Operating distributions terminate a partner's interest in the partnership.

In the sale of a partnership interest,a selling partner will recognize ordinary income (rather than capital gain)when the partnership assets include cash and land held for 5 years as an investment.

Which of the following is true concerning a partner's basis in assets (other than money)distributed in an operating distribution?

The SSC Partnership balance sheet includes the following assets on December 31 of the current year: Which of SSC's assets are considered hot assets under §751(a)?

Which of the following assets would not be classified as hot assets?

Hot assets include assets except cash,capital assets and §1231 assets.

Which of the following statements regarding the sale of a partnership interest is false?

A partner's debt relief from the sale of a partnership interest will decrease his outside basis.

Business Income,Deductions,and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Neorganization, and Liquidation

Forming and Operating Partnerships

S Corporations

State and Local Taxes

The Ustaxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters

Exam 10: Dispositions of Partnership Interests and Partnership Distributions

Operating distributions terminate a partner's interest in the partnership.

In the sale of a partnership interest,a selling partner will recognize ordinary income (rather than capital gain)when the partnership assets include cash and land held for 5 years as an investment.

Which of the following is true concerning a partner's basis in assets (other than money)distributed in an operating distribution?

The SSC Partnership balance sheet includes the following assets on December 31 of the current year: Which of SSC's assets are considered hot assets under §751(a)?

Which of the following assets would not be classified as hot assets?

Hot assets include assets except cash,capital assets and §1231 assets.

Which of the following statements regarding the sale of a partnership interest is false?

A partner's debt relief from the sale of a partnership interest will decrease his outside basis.

Business Income,Deductions,and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Neorganization, and Liquidation

Forming and Operating Partnerships

S Corporations

State and Local Taxes

The Ustaxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters