Exam 33: Partnerships and S Corporations

Bryan Corporation,an S corporation since its organization,is owned entirely by Mr.Bryan.The corporation uses a calendar year as its taxable year.Mr.Bryan paid $120,000 for his Bryan stock when the corporation was formed on January 1 of this year.For this year,Bryan Corporation reported the following results: Distributions of $40,000 were made during the year.What is the basis of Mr.Bryan's stock on December 31?

As a corporation,the S corporation can elect a fiscal year of its choosing.

Tony is the 100% shareholder of a corporation established five years ago.It has always been an S corporation.After adjustment for this year's corporate income,but before taking distributions into account,Tony has a $50,000 stock basis.The corporation pays Tony a $40,000 cash distribution.As a result of this distribution,Tony will have an ending stock basis and recognized income of

In a limited partnership,the limited partners are liable for partnership debts only to the extent of their investment in the partnership plus any amount they commit to contribute to the partnership if called upon.

An LLC that elects to be taxed like a partnership is also classified as a partnership for legal purposes.

Elise contributes property having a $60,000 FMV and a $25,000 adjusted basis and also renders accounting services valued at $30,000 in exchange for an 80% interest in the capital and profits of the EEE partnership.Evan contributes a building with a $90,000 FMV,an adjusted basis of $55,000,and subject to a mortgage of $70,000 for a 20% interest in the capital and profits of the EEE partnership.The partnership assumes the mortgage. a.What is each partner's respective basis in the partnership? b.What are the income tax consequences of the contributions? c.What is the partnership's basis in the assets transferred in by Elise and Evan?

Scott provides accounting services worth $40,000 to the ABC Partnership in exchange for a 20% interest in the capital and profits of the partnership.The tax result to Scott is

What are special allocations of partnership items and when are they permitted?

When an S corporation shareholder sells her stock,she must first recognize ordinary gain to the extent of her share of the unrealized receivables and appreciation on inventory held by the S corporation,with the balance of the gain treated as capital gain.

New business owners expecting losses in the early years will generally prefer the partnership (or LLC)form of business over the C and S corporation forms.

George transferred land having a $170,000 FMV and a $60,000 adjusted basis,which is subject to a $150,000 mortgage in exchange for a one-third interest in the GEF Partnership.The partnership owes no other liabilities.George,Elena,and Franz share profits and losses equally and each has a one-third interest in partnership capital.The basis to the partnership of the land transferred by George is

A partnership sells equipment and recognizes depreciation recapture under Sec.1245.In reporting its results for the year,the partnership will separately state the Sec.1245 depreciation recapture.

How does an electing large partnership differ from a regular partnership?

At the beginning of this year,Thomas and Claire were equal partners in a partnership that uses the calendar year as its tax year.On August 1,this year,Randy and Mike each contributed $50,000 cash for a 1/4 interest in the partnership.The interests of both Thomas and Claire drop to one-fourth.The partnership reports a $30,000 ordinary loss for the current tax year ending December 31.(Use the elective proration method with a monthly convention. ) What is the amount of loss allocated to each partner?

On January 1 of this year (assume not a leap year),Anne bought 50% of a calendar-year S corporation.Anne purchased the remaining 50% on July 1 (day 181 of the year).Anne's adjusted basis in the stock is $277,000 before any basis adjustments are taken into account.For this year,the corporation had a net operating loss of $365,000.What is the amount of the corporation's loss that Anne can deduct on her current individual income tax return?

When property is contributed to a partnership,the partnership's basis in the property is the same as that of the transferor partner even if gain is recognized on the transfer.

If a partner contributes property to a partnership,and that property is subject to a liability,the noncontributing partners increase the basis of their partnership interests by their share of the partnership liabilities that were transferred to the partnership.

A new corporation is formed on January 2,2017.In order to have the S election effective as of the first day of the first tax year,the Form 2553 must be filed no later than

The basis of a partner's interest in a partnership is adjusted to reflect each partner's share of income and deduction items only if a distribution is made to the partners.

Losses are disallowed on sales or exchanges between a partner and the partnership if the partner owns directly or indirectly more than a 50% interest in the capital or profits.