Exam 10: Partnership Taxation

Partnership income is taxed at the same tax rates as the income of corporations.

Jordan files his income tax return on a calendar-year basis.He is the principal partner of a partnership reporting on a June 30 fiscal year end basis.Jordan's share of the partnership's ordinary income was $24,000 for the fiscal year ended June 30, 2018, and $72,000 for the fiscal year ended June 30, 2019.How much should Jordan report on his 2018 individual income tax return as his share of taxable income from the partnership?

A partner contributes assets with a basis of $50,000 and a fair market value of $80,000 to a partnership.What is the basis of the property to the partnership and what is the general rule for the basis of appreciated property contributed to a partnership?

The basis of a partner's interest in a partnership is increased by losses of the partnership allocated to the partner.

There is no general partner required in a limited liability company (LLC).

Wallace and Pedersen have equal interests in the capital and profits of the partnership of Wallace and Pedersen.They are otherwise unrelated to each other.On August 1, 2018, Wallace sold 100 shares of Kalmia Mining Corporation to the partnership for its fair market value of $7,000.Wallace had bought the stock in 2009 at a cost of $10,000.What is Wallace's deductible loss for 2018 as a result of the sale of this stock?

Jack and Jill decided to pool their money and start a water delivery business.Since they trust each other so much, they did not draw up any legal documents for the business.During the first year of business, they earned $50,000 which was net of $10,000 paid to Jill as a guaranteed payment.During the second year of business, they decided to limit their liability exposure by forming an LLC. a.Was a partnership formed during the first year? b.If a partnership was formed, how much income will be taxed at the partnership level? c.For the second year, do they need to file a partnership tax return?

Limited liability companies may operate in more than one state.

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 the partnership's basis in the building contributed by Rita?

Which of the following statements is true about partnerships?

Owen owns 60 percent of the Big Time partnership.He sells to the partnership a machine for $70,000 that has a $45,000 basis.What would the taxable income be for Owen and what is the partnership's basis in the machine?

If a partner has a more than 50 percent interest in a partnership, a capital gain resulting from the sale of property by the partner to the partnership will be taxed as ordinary income to the partner, provided the property is not a capital asset to the partnership.

At the beginning of the year, Joe's basis in his partnership interest was $5,000.During the year, Joe contributed $10,000 in cash to the partnership and signed a bank loan to be personally liable for the partnership's debt of $25,000.For the current year, the partnership allocated a loss of $60,000 to Joe.In the following year, Joe's portion of the partnership income is $30,000.Which of the following is accurate?

Which one of the following is not true about partnerships and their income-reporting process?

Guaranteed payments made by a partnership must be made to individuals other than partners in the partnership.

The "at-risk" rule applies, with limited exceptions, to all taxable activities.

Oscar and Frank form an equal partnership, the O and F Partnership.Oscar contributes land with an adjusted basis of $45,000, subject to a mortgage of $100,000, in exchange for a partnership interest worth $250,000.Frank contributes cash of $100,000 and performs services for the partnership in exchange for a partnership interest worth $250,000. a.What is the amount of Oscar'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 Oscar's basis in his partnership interest immediately after the contribution? c.What is the amount of Frank's recognized income or loss (if any) as a result of the receipt of the partnership interest in exchange for the cash and services? d.What is the partnership's basis in the land received from Oscar?

Which one of the following is not true about partnerships?

Michael invests in Buxus Interests, a partnership.Michael's capital contribution to the partnership consists of $10,000 cash and equipment with an adjusted basis of $120,000 (fair market value of $150,000)subject to a nonrecourse liability of $60,000. a.Calculate the amount that Michael is at-risk in the activity after making the above contribution? b.​​If Michael's share of the partnership loss in the year after he makes the contribution is$150,000, how much of the loss may be deducted in that year (before considering thelimitations on passive losses)? Assume the partnership had no other transactions. c.If Michael has any nondeductible loss in part b, what may Michael do with thenondeductible loss?

Cypress Road is a partnership with two partners, Saul, a 60 percent partner, and Robbie, a 40 percent partner.The partnership has income for the year of $100,000 before guaranteed payments to Robbie.Guaranteed payments of $50,000 are paid to Robbie for his management services during the year.Calculate the amount of income that should be reported by Saul and Robbie from the partnership for the year.Saul should report income of $__________.Robbie should report income of $__________.