Exam 9: Partnership Formation and Operation

Identify which of the following statements is true.

There are no questions for this section. LO12: Compliance and Procedural Considerations

Yee manages Huang real estate,a partnership in which she is also a partner.She receives 40% of all partnership income before guaranteed payments,but no less than $80,000 per year.In the current year,the partnership reports $100,000 in ordinary income.What is Yee's distributive share and her guaranteed payment?

Explain the three different limitation provisions that a partner must satisfy before a loss can be deducted.

Karl arranges financing for a limited partnership to purchase real estate in exchange for a 50% interest in partnership profits.Two weeks later,Karl sells the profits interest for $30,000.In this tax year,Karl must recognize

Ali,a contractor,builds an office building for a construction partnership in exchange for a capital and profits interest in the partnership worth $500,000.Which of the following statements is correct?

The partners of the MCL Partnership,Martin,Clark,and Lewis,share profits and losses in a ratio of 4:3:3,respectively.The tax basis of each partner,as of December 31 of the current year,is as follows: Martin,$7,200; Clark,$6,000; and Lewis,$2,500.During the current year,the partnership incurred an ordinary loss of $15,000.The loss is not reflected in the tax basis figures presented above.Nothing else occurs during the year that would affect the partners' bases.As a result of this loss,what amount should Martin,Clark,and Lewis report on their individual tax returns for the current year? What limitations (other than the Sec.704(d)loss limitations)may prevent them from deducting their losses in the current year?

Rashad contributes a machine having a basis of $30,000 and an FMV of $25,000 to a partnership in exchange for a 20% interest in partnership capital,profits,and losses.Prior to the contribution,the partnership had recourse liabilities of $20,000.The partnership assumes a $20,000 recourse liability that is owed by Rashad on the machine.Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses.Rashad's basis in his partnership interest is

In January of this year,Arkeva,a calendar-year taxpayer,receives a $50,000 guaranteed payment from NFR Partnership.NFR deducted the payment during its tax year ending November 30 of last year.What tax year must Arkeva report her guaranteed payment in?

Charles Jordan files his income tax return on a calendar-year basis.He is a principal partner in a partnership using a tax year ending June 30.Jordan's share of the partnership's ordinary income was $24,000 for the fiscal year ending June 30 of last year and $72,000 for the fiscal year ending June 30 of the current year.Assume the partnership earned its income evenly throughout the year.How much should Jordan report on his Form 1040 for last year as his share of the partnership's ordinary income?

The holding period of a partnership interest acquired in exchange for a contributed capital asset begins on the date the partner transfers the asset to the partnership.

The definition of a partnership does not include

Nicholas,a 40% partner in Nedeau Partnership,gives one-half of his interest to his sister,Michelle.During the current year,Nicholas performs services for the partnership for which reasonable compensation is $80,000,but for which he accepts no pay.Nicholas and Michelle are each credited with a $100,000 distributive share,all of which is ordinary income.What are Nicholas' and Michelle's distributive share?

In January,Daryl and Louis form a partnership with each contributing $75,000 in cash.The partnership agreement provides that Daryl would receive a guaranteed payment for salary of $20,000 and that partnership profits and losses (computed after deducting Daryl's salary)would be shared equally.For the year,the partnership's operations result in an $18,000 ordinary loss after payment of Daryl's guaranteed payment.The partnership has no outstanding liabilities at year-end.What is the basis amount of Daryl's partnership interest at year-end?

Identify which of the following statements is true.

The XYZ Partnership reports the following operating results for the current year: Tai has a 20% profits interest and a 25% loss interest in the XYZ Partnership.His distributive share of ordinary income is

For a 20% interest in partnership capital,profits,and losses,Kasi contributes a machine having a basis of $30,000 and an FMV of $40,000.The partnership also assumes a $24,000 recourse liability secured by the machine.The partnership has $6,000 in recourse liabilities immediately preceding Kasi's contributions.Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses.Kasi's basis in the partnership interest is

Yee manages Huang real estate,a partnership in which she is also a partner.She receives 40% of all partnership income before guaranteed payments,but no less than $80,000 per year.In the current year,the partnership reports $400,000 in ordinary income.What is Yee's distributive share and her guaranteed payment?

On January 1,Helmut pays $2,000 for a 10% capital,profits,and loss interest in a partnership,which has recourse liabilities of $20,000.The partners share economic risk of loss from recourse liabilities in the same way they share partnership losses.In the same year,the partnership incurs losses of $6,000 and the recourse liabilities increase by $5,000.Helmut and the partnership use a calendar tax year-end.Helmut's basis at year-end is

Briefly explain the aggregate and entity theories as they relate to partnerships.