Exam 9: Partnership Formation and Operation

Stan had a basis in his partnership interest at the beginning of last year of $30,000.There was no change in partnership liabilities during the year.His share of the partnership's ordinary loss last year was $40,000 and the partnership had no separately stated items.This year,Stan has a distributive share of ordinary income of $30,000.The taxable income from the partnership reported on Stan's personal income tax return this year (ignoring the at-risk and passive activity loss limitations)is

Bao had investment land that he purchased in 1990 for $80,000.Two years ago,when the land was contributed to a partnership,the FMV was $50,000.The land is inventory in the hands of the partnership.The partnership then sells the land in the current year for $46,000.The partnership's recognized loss is

At the formation of the BD Partnership,Betty contributes land with a basis of $10,000 and an FMV of $30,000 and Dick contributes cash of $30,000.Betty and Dick share profits and losses equally.When the land is sold two years later for $50,000,Betty must recognize a gain of

Jerry has a 10% interest in the EKG Partnership capital,profits,and losses.He is a limited partner.At the beginning of the current year,his basis in his partnership interest is $10,000.The partnership earned $20,000 of ordinary income this year and repaid a $150,000 nonrecourse liability.What tax issues should Jerry consider with respect to reporting the results of this year's activities for the EKG Partnership on his personal return?

Janice has a 30% interest in the Jansen Partnership.She is to receive a guaranteed payment for deductible services of $50,000.The partnership reports $30,000 of ordinary income and a $100,000 long-term capital gain before deducting the guaranteed payment.What is her income from the partnership?

Brent is a limited partner in BC Partnership.His distributive share of partnership income and his guaranteed payment for the year are as follows: What is his self-employment income?

Explain the tax consequences for both the service partner and the partnership when a contribution of services is made to the partnership.

A partnership must file Form 1065 only if its income exceeds $1,000.

A partner's "distributive share" is the partner's share of any assets distributed by the partnership.

Identify which of the following statements is true.

William and Irene each contributed $20,000 cash to the WI Partnership on January 1 of last year.William and Irene share profits and losses equally.Last year,the partnership reported tax-exempt interest income of $4,000.This year,each partner receives $1,000 of the tax-exempt interest income in a cash distribution.There are no partnership liabilities and no other income,loss,contributions,or distributions during both years.William's basis in the partnership interest following these transactions is

Formation of a partnership requires legal documentation filed with the Secretary of State.

Elijah contributes securities with a $90,000 FMV (purchased in 2008 at a cost of $50,000)to become a one-third partner in the EJK Partnership on January 1 of the current year.The securities are sold on December 15 of the current year for $105,000.How much of the partnership's capital gain from the sale of these securities should be allocated to Elijah?

Mike and Jennifer form an equal partnership.Mike contributes cash of $15,000 and Jennifer contributes land having a $15,000 FMV and a basis of $5,000.If the partnership sells the land three years later for $18,000,what are the tax consequences to Mike and Jennifer?

Identify which of the following statements is true.

On December 1,Antonio,a member of a three-person partnership,purchases investment securities from the partnership for their $37,000 FMV.All partners share profits and losses equally.The securities were acquired by the partnership for $25,000 cash in March of the current year.What amount and character of gain will Antonio recognize because of this transaction?

At the beginning of the current year,Terry has a $40,000 basis for his general partnership interest in the TKE Partnership.He materially participates in the business activities of the partnership.On November 1,he receives a $4,000 distribution.His distributive share of TKE's current items is a $5,000 net long-term capital gain and a $50,000 ordinary loss.What amount will he include in his current year's tax return?

The Troika Partnership has an ordinary loss of $48,000 for the year.Before allocation of the loss at the end of the year,Shaad's one-third limited partnership interest has an adjusted basis of $5,000.Shaad's only other income or loss is his $30,000 salary from a factory job.What amount can Shaad deduct on his tax return as his share of the partnership's loss?

Identify which of the following statements is true.

Sarah purchased land for investment in 2008 for $80,000.In 2009 when the FMV of the land was only $70,000,she contributed it to the SL Partnership,which is in the business of developing and selling lots.SL Partnership developed the contributed land and sold it in 2010 for $50,000.What is the amount and character of the gain or loss?