Question 1

A partnership terminates for federal income tax purposes if

Accepted Answer

A) a general partner who owns a majority interest dies. 
B) state partnership law terminates the partnership. 
C) a partnership interest of more than 50% is gifted. 
D) within a 12-month period there is a sale or exchange of at least 50% of the total interest in partnership capital and profits. 
A) a general partner who owns a majority interest dies. 
B) state partnership law terminates the partnership. 
C) a partnership interest of more than 50% is gifted. 
D) within a 12-month period there is a sale or exchange of at least 50% of the total interest in partnership capital and profits.

Question 2

What are some advantages and disadvantages of making a Section 754 election?

Accepted Answer

Advantages: Without a 754 election,if a

Question 3

Ted King's basis for his interest in the Troy Partnership is $24,000.In complete liquidation of his interest,King receives cash of $4,000 and real property (not a Sec.751 asset)having an FMV of $40,000.Troy's adjusted basis for this realty is $15,000.Section 736 does not apply.King's basis for this realty is

Accepted Answer

A) $15,000. 
B) $20,000. 
C) $36,000. 
D) $40,000. 
A) $15,000. 
B) $20,000. 
C) $36,000. 
D) $40,000.

Question 4

The LM Partnership terminates for tax purposes on July 15 when Latasha sells her 60% capital and profits interest to Zoe for $100,000.The partnership has no liabilities,and its assets at the time of termination are as follows:   Marika,a 40% partner in the LM Partnership,has a $64,800 basis in her partnership interest (outside basis)at the time of the termination.She has held her LM Partnership interest for three years at the time of the termination.The bases of Marika and Zoe in the new LM Partnership is:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 5

The total bases of all distributed property in the partner's hands following a nonliquidating distribution is limited to

Accepted Answer

A) the partner's predistribution basis in his partnership interest. 
B) the FMV of the property distributed. 
C) the partnership's bases in the distributed property. 
D) the predistribution FMV of the partner's partnership interest. 
A) the partner's predistribution basis in his partnership interest. 
B) the FMV of the property distributed. 
C) the partnership's bases in the distributed property. 
D) the predistribution FMV of the partner's partnership interest.

Question 6

A partnership cannot recognize a gain or loss on a current distribution.

Accepted Answer

A) True 
 B)False

Question 7

On November 30,Teri received a current distribution of cash of $4,000,marketable securities with a basis of $24,000 and an FMV of $30,000,and inventory with a basis of $2,000 and an FMV of $6,000.Prior to the distribution,Teri's basis in her interest in the partnership was $30,000.(There is no Sec.751 exchange as a result of the distribution. )How much gain (if any)must Teri recognize as a result of the distribution?

Accepted Answer

The answer of On November 30,Teri received a current distribution...

Question 8

If a distribution occurs within ________ years of the contribution date,in a nonliquidating distribution that does not qualify for Sec.751 treatment,the distribution event may trigger a precontribution gain or loss.

Accepted Answer

A) three 
B) five 
C) seven 
D) unlimited 
A) three 
B) five 
C) seven 
D) unlimited

Question 9

What is the definition of "substantially appreciated inventory"?

Accepted Answer

A) inventory with a FMV greater than its basis 
B) inventory and unrealized receivables with a FMV greater than their basis 
C) inventory with a FMV greater than 120% of its basis 
D) inventory and unrealized receivables with a FMV greater than 120% of their basis 
A) inventory with a FMV greater than its basis 
B) inventory and unrealized receivables with a FMV greater than their basis 
C) inventory with a FMV greater than 120% of its basis 
D) inventory and unrealized receivables with a FMV greater than 120% of their basis

Question 10

When a retiring partner receives payments that exceed the value of that partner's partnership property,the excess payment is a guaranteed payment.

Accepted Answer

A) True 
 B)False

Question 11

Sally is a calendar-year taxpayer who owns a 30% capital and profits interest in the SEM Partnership.Eric sells the remaining 70% capital and profits interest to Michelle on October 3.The partnership year-end is March 31 as permitted by the IRS for business purposes.Which of the following statements is correct?

Accepted Answer

A) Sally must conform her tax year with the partnership tax year. 
B) The new partnership is a continuation of the old partnership. 
C) Sally's tax return will include a partnership distributive share only for the period ending March 31. 
D) Sally's tax return will include partnership distributive shares for periods ending March 31 and October 3. 
A) Sally must conform her tax year with the partnership tax year. 
B) The new partnership is a continuation of the old partnership. 
C) Sally's tax return will include a partnership distributive share only for the period ending March 31. 
D) Sally's tax return will include partnership distributive shares for periods ending March 31 and October 3.

Question 12

The definition of "inventory" for purposes of Sec.751 includes

Accepted Answer

A) cash. 
B) land held for investment. 
C) marketable securities not held by dealers. 
D) depreciation recapture potential on Sec.1231 assets. 
A) cash. 
B) land held for investment. 
C) marketable securities not held by dealers. 
D) depreciation recapture potential on Sec.1231 assets.

Question 13

Identify which of the following statements is true.

Accepted Answer

A) John Albin is a retired partner of Brill & Crum,a personal service partnership.Albin has not rendered any services to Brill & Crum since his retirement six years ago.Under the provisions of Albin's retirement agreement,Brill & Crum is obligated to pay Albin 10% of the partnership's net income each year through the end of the current year.In compliance with the agreement,Brill & Crum pay Albin $25,000 in the current year.Albin should treat this $25,000 as a long-term capital gain. 
B) An exchange of partnership interests in different partnerships qualifies under the like-kind exchange rules. 
C) The payment for partnership property to a retiring partner is not deductible by the partnership and often not income to the retiring partner. 
D) All of the above are false. 
A) John Albin is a retired partner of Brill & Crum,a personal service partnership.Albin has not rendered any services to Brill & Crum since his retirement six years ago.Under the provisions of Albin's retirement agreement,Brill & Crum is obligated to pay Albin 10% of the partnership's net income each year through the end of the current year.In compliance with the agreement,Brill & Crum pay Albin $25,000 in the current year.Albin should treat this $25,000 as a long-term capital gain. 
B) An exchange of partnership interests in different partnerships qualifies under the like-kind exchange rules. 
C) The payment for partnership property to a retiring partner is not deductible by the partnership and often not income to the retiring partner. 
D) All of the above are false.

Question 14

Do most distributions made by a partnership require a Sec.751 calculation?

Accepted Answer

No.Many current distributions are made p

Question 15

Mirabelle contributed land with a $5,000 basis and a $9,000 FMV to MS Partnership four years ago.This year the land is distributed to Sergio,another partner in the partnership.At the time of distribution,the land had a $12,000 FMV.How much gain should Mirabelle and Sergio recognize?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 16

The Tandy Partnership owns the following assets on December 31:
   Is the partnership's inventory considered to be substantially appreciated for purposes of Sec.751? Show your work.

Accepted Answer

For purposes of the substantially apprec

Question 17

What is the character of the gain/loss on the sale of a partnership interest?

Accepted Answer

Because a partnership interest is genera

Question 18

The sale of a partnership interest always results in capital gain or loss rather than ordinary income.

Accepted Answer

A) True 
 B)False

Question 19

Can a partner recognize both a gain and a loss on the sale of a partnership interest? If so,under what conditions?

Accepted Answer

A partner must divide the sale of a part

Question 20

Eicho's interest in the DPQ Partnership is terminated when her basis in the partnership is $70,000.She receives a liquidating distribution of $20,000 cash and inventory with a $24,000 basis and a $40,000 FMV.What is her gain or loss,and what is her basis in the inventory received?

Accepted Answer

She has a recognized loss of $

Exam 10: Special Partnership Issues

A partnership terminates for federal income tax purposes if

What are some advantages and disadvantages of making a Section 754 election?

The total bases of all distributed property in the partner's hands following a nonliquidating distribution is limited to

A partnership cannot recognize a gain or loss on a current distribution.

If a distribution occurs within ________ years of the contribution date,in a nonliquidating distribution that does not qualify for Sec.751 treatment,the distribution event may trigger a precontribution gain or loss.

What is the definition of "substantially appreciated inventory"?

When a retiring partner receives payments that exceed the value of that partner's partnership property,the excess payment is a guaranteed payment.

The definition of "inventory" for purposes of Sec.751 includes

Identify which of the following statements is true.

Do most distributions made by a partnership require a Sec.751 calculation?

Mirabelle contributed land with a $5,000 basis and a $9,000 FMV to MS Partnership four years ago.This year the land is distributed to Sergio,another partner in the partnership.At the time of distribution,the land had a $12,000 FMV.How much gain should Mirabelle and Sergio recognize?

The Tandy Partnership owns the following assets on December 31: Is the partnership's inventory considered to be substantially appreciated for purposes of Sec.751? Show your work.

What is the character of the gain/loss on the sale of a partnership interest?

The sale of a partnership interest always results in capital gain or loss rather than ordinary income.

Can a partner recognize both a gain and a loss on the sale of a partnership interest? If so,under what conditions?

Eicho's interest in the DPQ Partnership is terminated when her basis in the partnership is $70,000.She receives a liquidating distribution of $20,000 cash and inventory with a $24,000 basis and a $40,000 FMV.What is her gain or loss,and what is her basis in the inventory received?

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