Exam 33: Partnerships and S Corporations

When capital or Sec.1231 assets are transferred to a partnership in exchange for a partnership interest qualifying under Sec.721,the holding period for the partnership interest includes the holding period of the contributed property.

Empire Corporation has operated as a C corporation for its first three years of existence because one of its shareholders disqualified it from electing S corporation status.That shareholder is now gone,and the remaining shareholders have elected S corporation status effective for the current year.Empire Corporation has one highly appreciated asset that it hopes to sell in the near future.How many years must elapse before the sale in order to avoid the built-in gains tax?

Because a partnership is a pass-through entity rather than a taxable entity,partnerships need not file tax returns.

Richard has a 50% interest in a partnership,and he materially participates in the partnership's business.Richard's adjusted basis in the partnership was $60,000 at the beginning of the year,including his share of partnership liabilities.There were no distributions to Richard during the year.During the current year,the partnership borrowed $160,000 from a local bank to purchase equipment needed in the business.All of the partners are personally liable for all partnership debts.The partnership incurred a $320,000 loss this year.What amount can Richard claim as a loss from the partnership on his individual tax return this year?

Ariel receives from her partnership a nonliquidating distribution of $9,000 cash plus a parcel of land.The partnership had purchased the land five years ago for $20,000,but it is worth $28,000 at the time of the distribution.Ariel's predistribution basis is $17,000.How much income will Ariel recognize due to the distribution,and what is her basis in the land?

Although a partner's distributive share of income,deductions,losses,and credits is generally determined by partnership agreement,special allocation provisions restrict the partners' freedom to shift some tax benefits among partners.

All of the following statements are true regarding nonliquidating distributions of a partnership except

Atiqa receives a nonliquidating distribution of land from her partnership.The partnership purchased the land five years ago for $20,000.At the time of the distribution,it is worth $28,000.Prior to the distribution,Atiqa's basis in her partnership interest is $37,000.Atiqa's basis in the distributed land and her post-distribution basis in her partnership interest are

Mark receives a nonliquidating distribution of $10,000 cash and a parcel of land having an adjusted basis of $18,000 and a fair market value of $25,000. a.Mark's basis in his partnership interest prior to the distribution is $50,000. (1)How much income will the partnership recognize due to the distribution? (2)How much income will Mark recognize due to the distribution? (3)What is Mark's basis in his partnership interest after the distribution ? (4)What is Mark's basis in the land? b.Assume Mark's basis in his partnership interest is instead $22,000 and redetermine the responses to questions (1)through (4).

The corporate built-in gains tax does not apply to a corporation that has always been taxed as an S corporation.

Martha transferred property with a FMV of $60,000 (adjusted basis $30,000),which is subject to a $40,000 mortgage in exchange for a one-third interest in a partnership.The partnership has no other liabilities.The partners of MNO own the partnership equally.The partnership's basis in the property contributed is

Which of the following will be separately stated by a partnership reporting its operations for the year to the IRS?

Guaranteed payments are not deductible by the partnership in arriving at partnership ordinary income but are included in the receiving partner's income.

If a partner contributes depreciable property to a partnership in exchange for a partnership interest,the depreciation recapture potential of the contributed assets does not carry over to the partnership.

All the following are types of pass-through entities except

A partnership may elect to use a fiscal year if the business recognizes 25% or more of its annual gross receipts in the last two months of the fiscal year for three consecutive 12-month periods.

What is the primary purpose of Form 1065,Partnership Tax Return?

Brittany receives a nonliquidating distribution of $48,000 cash from her partnership.Brittany's basis in her partnership interest prior to the distribution is $25,000.What are the tax consequences of the distribution?

All of the following could file partnership tax returns except

A partnership is generally required to use the tax year of one or more partners who own more than a 50% interest in partnership profits and capital.