Question 1

Losses on transactions between a partnership and its partners are always disallowed.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following liabilities would be considered nonrecourse?

Accepted Answer

A) A bank loan for which the taxpayer is personally liable. 
B) Credit card debt. 
C) A $20,000 real estate loan which allows the bank to take the real estate if the taxpayer stops making payments on the loan. 
D) All of the above are nonrecourse liabilities. 
A) A bank loan for which the taxpayer is personally liable. 
B) Credit card debt. 
C) A $20,000 real estate loan which allows the bank to take the real estate if the taxpayer stops making payments on the loan. 
D) All of the above are nonrecourse liabilities.

Question 3

Under which of the following circumstances would a partnership terminate and close its tax year?

Accepted Answer

A) Divorce of a partner 
B) Cessation of business activities by the partnership 
C) Entry of a new partner 
D) Distribution of property to a 10 percent partner in complete termination of the partner's interest in the partnership 
E) None of the above 
A) Divorce of a partner 
B) Cessation of business activities by the partnership 
C) Entry of a new partner 
D) Distribution of property to a 10 percent partner in complete termination of the partner's interest in the partnership 
E) None of the above

Question 4

During the current year, Jay is a partner in an automobile dealership.Jay's amount at risk at the beginning of the year is $90,000, and during the current year Jay's share of the dealership's ordinary loss is $120,000.
a.What is the amount of the loss from the automobile dealership that Jay may deduct in the current year?
b.If the dealership has a profit of $63,000 in the subsequent year, how much of the subsequent year income is taxable to Jay?

Accepted Answer

a.$90,000, the at-ri

Question 5

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 original 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 original 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 6

Josh is a 30% partner in the Ghost Partnership.Ghost paid W-2 wages of $100,000 and also made a guaranteed payment to Josh of $20,000.The amount includable as wages in Josh's wage limitation on his QBI deduction is:

Accepted Answer

A) $0. 
B) $30,000. 
C) $50,000. 
D) $100,000. 
A) $0. 
B) $30,000. 
C) $50,000. 
D) $100,000.

Question 7

A partnership may deduct a single personal exemption in calculating ordinary taxable income or loss.

Accepted Answer

A) True 
 B)False

Question 8

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 9

List three benefits of an LLC.

Accepted Answer

A student may list any of the following

Question 10

For the following separate, independent situations indicate with a "Yes" if a partnership return needs to be filed.Mark with a "No" if a partnership return is not required.
a.Tony and Gina form a joint venture to import goods from South Korea.
b.Nancy decided to start her own private investigative business.
c.Uncle Pennybag's estate assets are pooled together until they can be distributedto the beneficiaries.
d.Howie, Dewey, and Cheatem form an LLC.
e.Flora, Fauna, and Merryweather start a child care business.No official documentsare drawn up.

Accepted Answer

a.Yes
b.No

Question 11

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 the above 
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 the above

Question 12

A partnership generally must adopt the same tax year as its majority partners.

Accepted Answer

A) True 
 B)False

Question 13

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 14

A partnership must separately report Section 1231 gains and losses rather than including them in ordinary taxable income.

Accepted Answer

A) True 
 B)False

Question 15

Cooke and Thatcher form the C&T Partnership.Cooke contributes equipment with a fair market value of $70,000 and a basis of $35,000, in exchange for a 70 percent interest in the partnership capital and profits.Thatcher performs services worth $30,000 for the partnership in exchange for a 30 percent interest in capital and profits.​
a.What is the amount of Cooke's recognized gain or loss (if any) as a result of the contribution to the partnership in exchange for the partnership interest?
b.What is Cooke's basis in his partnership interest immediately after the contribution?
c.What is the amount of Thatcher's recognized income or loss (if any) on the contribution to the partnership?
d.What is Thatcher's basis in her partnership interest immediately after the contribution?
e.What is C&T Partnership's basis in the equipment received from Cooke?

Accepted Answer

a.$0.
b.$35,000, the same as the basis o

Question 16

On July 1 of the current year, Ambrose was admitted to the partnership of Ambrose and Nectar.His contribution to capital consisted of 500 shares of stock in Paniculata Corporation, which he bought in 2014 for $10,000 and which had a fair market value of $50,000 on July 1 of the current year.Ambrose's interest in the partnership's capital and profits is 25 percent.On July 1 of the current year, the fair market value of the partnership's net assets (after Ambrose was admitted)was $200,000.What is Ambrose's taxable gain in the current year on the exchange of stock for his partnership interest?

Accepted Answer

A) $0 gain or loss 
B) $40,000 ordinary income 
C) $40,000 long-term capital gain 
D) $40,000 Section 1231 gain 
E) None of the above 
A) $0 gain or loss 
B) $40,000 ordinary income 
C) $40,000 long-term capital gain 
D) $40,000 Section 1231 gain 
E) None of the above

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Phil and Bill each own a 50 percent interest in P&B Interests.P&B Interests has ordinary income for the year of $35,000 before guaranteed payments to Phil.If Phil receives guaranteed payments of $20,000 during the tax year, what is the total income or loss that should be reported by Bill from the partnership for this tax year?

Accepted Answer

A) $5,000 income 
B) $7,500 income 
C) $25,000 income 
D) $30,000 income 
E) None of the above 
A) $5,000 income 
B) $7,500 income 
C) $25,000 income 
D) $30,000 income 
E) None of the above

Question 19

A partnership may not show a loss as a result of deducting guaranteed payments made to the partners.

Accepted Answer

A) True 
 B)False

Question 20

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

Losses on transactions between a partnership and its partners are always disallowed.

Which of the following liabilities would be considered nonrecourse?

Under which of the following circumstances would a partnership terminate and close its tax year?

Which of the following statements about partnerships is true?

Josh is a 30% partner in the Ghost Partnership.Ghost paid W-2 wages of $100,000 and also made a guaranteed payment to Josh of $20,000.The amount includable as wages in Josh's wage limitation on his QBI deduction is:

A partnership may deduct a single personal exemption in calculating ordinary taxable income or loss.

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

List three benefits of an LLC.

A partnership generally must adopt the same tax year as its majority partners.

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

A partnership must separately report Section 1231 gains and losses rather than including them in ordinary taxable income.

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

A partnership may not show a loss as a result of deducting guaranteed payments made to the partners.

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

The Individual Income Tax Return

Gross Income and Exclusions

Additional Income Part 1

Additional Income Part 2

Deductions and Adjustments to Income

Accounting Methods and 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

Losses on transactions between a partnership and its partners are always disallowed.

Which of the following liabilities would be considered nonrecourse?

Under which of the following circumstances would a partnership terminate and close its tax year?

Which of the following statements about partnerships is true?

Josh is a 30% partner in the Ghost Partnership.Ghost paid W-2 wages of $100,000 and also made a guaranteed payment to Josh of $20,000.The amount includable as wages in Josh's wage limitation on his QBI deduction is:

A partnership may deduct a single personal exemption in calculating ordinary taxable income or loss.

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

List three benefits of an LLC.

A partnership generally must adopt the same tax year as its majority partners.

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

A partnership must separately report Section 1231 gains and losses rather than including them in ordinary taxable income.

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

A partnership may not show a loss as a result of deducting guaranteed payments made to the partners.

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

The Individual Income Tax Return

Gross Income and Exclusions

Additional Income Part 1

Additional Income Part 2

Deductions and Adjustments to Income

Accounting Methods and 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