Exam 33: Partnerships and S Corporations

Stephanie owns a 25% interest in a qualifying S corporation.Stephanie's basis in the stock was $40,000 at the end of the year after adjustments are made for capital contributions and distributions (but not operating results).Stephanie also loaned the S corporation $10,000 this year.The S corporation incurred a $240,000 ordinary loss this year.Assume that next year the S corporation's ordinary income is $160,000.Stephanie's basis in her stock at the end of next year is

Joey and Bob each have 50% interest in a Partnership.Both Joey and the partnership file returns on a calendar-year basis.Partnership Q had a $12,000 loss in 2016.Joey's adjusted basis in his partnership interest on January 1,2016,was $5,000.In 2017,the partnership had a profit of $10,000.Assuming there were no other adjustments to Joey's basis in the partnership,what amount of partnership income (loss)should Joey show on his 2016 and 2017 individual income tax returns?

Limited liability of partners or members is an advantage of all the following with the exception of

Ben is a 30% partner in a partnership.The partnership guarantees Ben payments of $25,000 for the year.If the partnership has ordinary income of $15,000 before adjustment for the guaranteed payment,Ben must report

Discuss whether a C corporation,a partnership,or an S corporation form of organization would be preferred if net operating losses are anticipated in the initial years of operation.

Patrick acquired a 50% interest in a partnership by contributing property that had an adjusted basis of $8,000 and a fair market value of $29,000.The property was subject to a liability of $22,000,which the partnership assumed for legitimate business purposes.Which of the following statements is correct?

The basis of a partnership interest is equal to the sum of money contributed plus the FMV of the property transferred to the partnership.

Why are some partnership items separately stated?

An S corporation recognizes gain or loss if it distributes property other than money to its shareholders.

Pass-through entities are taxed at only one level-the ownership level.

If partners having a majority interest in the partnership do not have the same tax year,the partnership uses the same tax year as all of its principal partners.Principal partners are those with 10% or greater interest in the partnership.

Torrie and Laura form a partnership in which they are equal partners.Torrie contributes $100,000 cash.Laura contributes $40,000 cash and a painting worth $60,000.Laura purchased the painting three years ago for $45,000.In two years the partnership sells the painting for $80,000. a.What is the partnership's basis in the painting? b.When the painting is sold,how much gain is allocated to each partner?

All of the following would reduce the basis of a shareholder's stock in an S corporation,except

Kuda exchanges property with a FMV of $630,000 and an adjusted basis of $450,000 in exchange for a one-third interest in a partnership.The property is subject to a mortgage with a principal balance of $300,000 which the partnership assumes.As a result of Kuda joining the partnership,Alejandro,a pre-existing partner,now has a one-third interest in the partnership.Alejandro will adjust his basis to

Dori and Matt will be equal owners of a new business and will be making cash contributions to start up the business.They expect substantial losses in the early years so the business will take out a loan from the bank which Dori and Matt will have to guarantee.For tax purposes,the preferred business form for these early years will be

S corporation shareholders who own more than 2% of the outstanding stock are eligible for which of the following tax-free benefits?

Which of the following is not a requirement to be an electing large partnership?

Gain is recognized by an S corporation when it distributes appreciated property to its shareholders.

Sandy and Larry each have a 50% interest in SL Partnership.The partnership and the individuals file on a calendar-year basis.In 2016,SL Partnership had a $30,000 ordinary loss.Sandy's adjusted basis in her partnership interest on January 1,2016,was $12,000.In 2017,SL Partnership had ordinary income of $20,000.Assuming there were no other adjustments to Sandy's basis in the partnership,what amount of partnership income (loss)would Sandy show on her 2016 and 2017 individual income tax returns?

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.Due to the distribution Atiqa and the partnership will recognize income of