Exam 9: Partnership Formation and Operation

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?

Albert contributes a Sec.1231 asset to a partnership on June 1 of this year in exchange for a 10% partnership interest.He had purchased the asset on March 1,2002.His holding period for the partnership interest begins

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

Identify which of the following statements is true.

Identify which of the following statements is true.

Identify which of the following statements is true.

What is included in partnership taxable income?

Doug purchases a 20% interest in the Quix Partnership for $10,000 on January 1,2019,and begins to materially participate in the partnership's business.The Quix Partnership uses the calendar year as its tax year.At the time of the purchase,the Quix Partnership has $4,000 in liabilities,and Doug's share is 20%.What is Doug's basis in his partnership interest on January 1,2010?

When determining the guaranteed payment,which of the following statements is correct?

Limited partners must consider the at-risk,basis,and passive loss limitations when determining the amount of their deductible loss.

Latoya owns a 10% interest in the ABC Partnership from January 1 through June 30 (the 181st day of the tax year)of the current year (a non-leap year).On July 1,Latoya buys an additional 10% interest in the partnership.The XYZ Partnership's ordinary income is $109,500 and it is earned evenly throughout the year.Latoya's distributive share of the ordinary income is

When the PDQ Partnership formed,it knew it had a good product,but it was a bit short on cash.After seeing the product,Jim,a CPA,said that he would set up an accounting system for the partnership in exchange for a 15% profits interest in the partnership.The partners agreed to this,as Jim was receiving only a profits interest and not a capital interest in the partnership.Jim's usual fee for this type of service would be approximately $5,000.What tax issues should Jim and the PDQ Partnership consider with respect to the payment made for the services?

Mary and Martha,who had been friends for years,decided to open a retail store to sell kitchen and bath items.In June,they spent $500 looking for a suitable location.They paid an attorney $1,500 to have their partnership agreement drawn up,and they paid an accountant $400 to set up their accounting system.During July,they searched for vendors for the merchandise they planned to carry and stocked their shelves.The store opened in August and was immediately successful.They paid the accountant $300 to prepare an income statement for August.What tax issues should the partnership consider with regard to beginning this business?

Yong contributes a machine having an adjusted basis of $20,000 and an FMV of $25,000 for a 10% partnership interest.Yong had taken $10,000 of depreciation prior to the contribution.The partnership has no liabilities.As a result of the contribution,Yong must recognize

David purchased a 10% capital and profits interest in a partnership this year.He does not participate in the partnership's business.David has no passive income in the current year.His distributive share of the partnership's loss is $40,000 for this year.David's Sec.705 basis in the partnership is $32,000 and his at-risk basis is $16,000 at the end of the current year.How much of the loss can David deduct on his tax return?

In computing the ordinary income of a partnership,a deduction is allowed for

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?

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?

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

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