Exam 33: Partnerships and S Corporations

In the syndication of a partnership,brokerage and registration fees,printing fees,and legal fees of the underwriter total $50,000.With respect to these fees,the partnership must

A liquidating distribution is treated as a sale or exchange of a partnership interest.

Voluntary revocation of an S corporation election is permitted only if consent is obtained from all shareholders.

For each of the following independent cases below,indicate whether the entity will be taxed as an S corporation or a C corporation for the respective period. a.Richards Corporation,uses the calendar year as its tax year.It files an S election on March 31,2017.If no reasonable cause is shown,how will Richards Corporation be treated for tax purposes in 2017? b.Shareholders owning more than 50% of the stock of Harper Corporation,a qualifying calendar-year S corporation,consent to a voluntary revocation statement filed by the corporation on March 12,2017.How will Harper Corporation be treated for tax purposes in 2017? c.Shareholders owning more than 50% of the stock of Hazelwood Corporation,a qualifying calendar-year S corporation,consent to a voluntary revocation statement filed by the corporation on March 12,2017.The prospective termination date is July 1,2017.How will Hazelwood Corporation be treated for tax purposes in 2017? d.One of the shareholders of Omni Corporation,a calendar-year S corporation,sells his stock to a Canadian individual on July 8,2017.

A nonliquidating distribution of cash or property from the partnership to a partner is generally treated as a tax-free return of capital to the extent of a partner's basis.

Worthy Corporation elected to be taxed as an S corporation on January 1,of last year,effective last year.It had previously been a C corporation.On the effective date of the S election,Worthy had land with a $70,000 basis and a $210,000 FMV.No net unrealized losses exist on the date of the S corporation election.The land is sold this year for $250,000.The tax result of the sale by Worthy is

On April 4,2017,Joan contributes business equipment (she had purchased on October 23,2012)having a $45,000 FMV and a $40,000 adjusted basis to the EJK Partnership in exchange for a 25% interest in the capital and profits.The basis of the property and the date the holding period begins for the partnership is

A shareholder's deduction for ordinary losses and separately stated items cannot exceed his basis for the S corporation stock plus the debt basis for the shareholder loans made to the corporation and corporate-level liabilities personally guaranteed by the shareholder.

Realto LLC is a tax partnership which has four equal partners.The LLC holds highly appreciated real estate in midtown Manhattan.Trina is about to purchase a 20% ownership interest in the LLC.To minimize her future tax burden as a partner,she should negotiate a Sec.754 election with the current partners.

Lars has a basis in his partnership interest in XXL of $100,000.He sells the partnership interest in XXL for $160,000.XXL is a cash-basis partnership which has accounts receivable with a $30,000 fair market value and a zero adjusted basis.Lars's share of these receivables is $10,000.What is the amount and character of the gain that Lars recognizes on the sale of his partnership interest?

Edith contributes land having $100,000 FMV and a $85,000 adjusted basis,which is subject to a $66,000 mortgage in exchange for a one-third interest in the EHK Partnership.The partnership owes no other liabilities.After the contribution,Kate,Edith,and Helen share profits and losses equally and each has a one-third interest in the partnership capital.Assume that Kate has a basis in her partnership interest of $50,000 before Edith's contribution to the partnership.The effect of Edith's contribution on partner Kate's basis is to

Jamahl has a 65% interest in a partnership.Jamahl sells land to the JK partnership for $70,000.Prior to the sale,the land had a FMV of $70,000 and an adjusted basis of $90,000 to Jamahl.Two years later the partnership sells the land for $123,000.Due to the sale,the partnership will recognize

Gains on sales or exchanges between a partner and the partnership are treated as ordinary income if the partner owns more than a 50% interest in the capital or profits and the asset that is exchanged is not a capital asset in the transferee's hands.

On July 1,Alexandra contributes business equipment (which she had purchased two years ago)having a $45,000 FMV and a $40,000 adjusted basis to the AX Partnership in exchange for a 25% interest in the capital and profits.The basis of Alexandra's partnership interest is

On July 1,Joseph,a 10% owner,sells his interest in ABC Partnership to Andy,an outsider,for $165,000 cash and the release from $20,000 of partnership liabilities.Joseph's partnership interest at the beginning of the year was $120,000.The partnership earned income through June 30 of $100,000.Joseph's share of partnership liabilities increased by $5,000 from January 1 to June 30.What are the tax consequences to Joseph on the sale of his partnership interest (assume the partnership does not hold any inventory or unrealized receivables)?

David and Joycelyn form an equal partnership in the current year.No special allocation is provided for in the partnership agreement.During the year David contributes land having a $90,000 basis and a $100,000 FMV in exchange for the initial partnership interest.In addition,the partnership earns $50,000 of ordinary income while partnership liabilities increase from zero to $30,000 by the end of the tax year.The partnership earns $20,000 of tax-exempt interest during the year.David's basis at the end of the current year is

DAD Partnership has one corporate partner,Domino Corporation,with a fiscal year-end of June 30.Domino has a 30% interest in DAD.The other partners are individuals with a calendar year for tax purposes,none of whom has a 5% or more interest in DAD Partnership.What are DAD Partnership's choices with respect to selecting a tax year?

Separately stated items are allocated to the S corporation shareholders based on the number of shares of stock owned on the last day of the S corporation's taxable year.

Marlena contributes property having a $30,000 FMV and a $27,000 adjusted basis and also renders accounting services valued at $15,000 in exchange for a 30% interest in the capital and profits of the BBB partnership.LeBron contributes a building with a $100,000 FMV,an adjusted basis of $88,000,and subject to a mortgage of $80,000 for a 40% interest in the capital and profits of the BBB partnership.The partnership assumes the mortgage.Ty contributes cash of $60,000 for a 30% interest in the capital and profits of the BBB partnership. a.What is each partner's respective basis in the partnership? b.What are the current income tax consequences to each partner? c.What is the partnership's basis in the assets transferred in by the partners?

The expenses associated with promoting and marketing partnership interests can be currently deducted if $5,000 or less.Expenses in excess of $5,000 are amortized over 180 months.