Exam 10: Partnership Taxation

Rochelle owns 40 percent of a partnership and her brother owns the remaining 60 percent interest.During the current tax year, Rochelle sold a building to the partnership for $180,000, to be used for the partnership's office.She had held the building for 3 years at the time of the sale. a.​Assuming Rochelle's basis in the building was $200,000, what is the amount and nature of her gain or loss? b.​Assuming Rochelle's basis in the building was $150,000, what is the amount and nature of her gain or loss?

Loretta contributes property to a partnership in exchange for a 25 percent partnership interest.The property contributed has a fair market value of $45,000 and a basis of $35,000 on the date of the contribution to the partnership.In addition, Loretta receives a 10 percent partnership interest, valued at $18,000, in exchange for services rendered to the partnership.What is Loretta's basis in her partnership interest, immediately after these transactions?

During the current year, Norman contributed investment property held for over one year to the Mary Ann Partnership for a 40 percent interest in partnership capital and profits.His tax basis in the property contributed was $8,000, and the property had a fair market value of $10,000 on the date of the contribution to the partnership.What gain or loss should Norman report as a result of the contribution of the property to the partnership in exchange for the 40 percent partnership interest?

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?

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?

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?

Leslie contributes a building worth $88,000, with an adjusted basis of $40,000, to a partnership in exchange for a 50 percent interest in the partnership's capital and profits.What is the amount of Leslie's basis in her partnership interest immediately after the contribution?

On July 1 of the current year, Bertram acquired a 25 percent interest in Sycamore Company, a partnership, by contributing property with an adjusted basis of $7,000 and a fair market value of $12,000.The property was subject to a mortgage of $8,000, which was assumed by Sycamore Company.What is Bertram's basis in his partnership interest in Sycamore Company immediately after the partnership contribution?

Jennifer has a 25 percent interest in the Aspen Aircraft partnership.Her basis in her partnership interest is $10,000 at the beginning of the year.The partnership reported the following activity for the year: Ordinary income \4 0,000 Section 1231 gain \1 0,000 Charitable contribution \1 2,000 Total distributions to partners \2 8,000 What is Jennifer's basis in her partnership interest at the end of the year?

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 is true about an LLC (Limited Liability Company)?

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?

Mario and Luigi are brothers and they are equal partners in Pipes of Your Dreams Plumbing.Mario sells his fancy sports car to the business for $40,000.Mario's basis in the car is $45,000. a.What is the amount of Mario's recognized gain or loss on this transaction, and what is the nature of the gain or loss? b.If the partnership later sells the sports car for $55,000, how much of the gain is recognized?

The "at-risk" rule acts to prevent tax shelters from generating large losses for their investors while exposing them to little personal risk.

Losses are disallowed for transactions between a partnership and a partner who has a 50 percent interest in the partnership.

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

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

In December of 2018, Ms.Havisham and Pip form a wedding planning business.Each of them own 50 percent of the partnership.The partnership establishes a September 30th year-end since most weddings are during the summer.Therefore, the partnership's initial year-end is September 30, 2019.For the month of December 2018, the partnership made $3,000 after Ms.Havisham's guaranteed payment of $1,000.From January through September of 2019, the partnership made a net income of $65,000 after a $1,500 per month guaranteed payment to Ms.Havisham.​ a.How much income should Ms.Havisham report for 2018? b.How much income should Ms.Havisham report for 2019?

Debbie and Betty operate the D & B partnership.Betty, a 50 percent partner, receives a guaranteed payment of $10,000 for her services in operating the partnership.The partnership has income before the guaranteed payment of $5,000.What is the taxable income Debbie and Betty must each report from the partnership for the year?Debbie should report income of $__________.Betty should report income of $__________.