Exam 9: Partnership Formation and Operation

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?

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?

Clark and Lewis are partners who share the profits and losses of the C&L Partnership 60% and 40%,respectively.The tax basis of each partner's interest in the partnership as of December 31 of last year was as follows: Clark,$14,000; Lewis,$12,000.During the current year,the partnership had ordinary income of $20,000 and a long-term capital loss of $10,000 from the sale of securities.The partnership made cash distributions proportionately to the two partners during this year totaling $20,000.What is the amount of Lewis's tax basis of his partnership interest on December 31 of the current year?

A partnership has one general partner,Allen,who materially participates in the business.Allen had a $30,000 distributive share of ordinary losses for this year and the partnership had no separately stated gains or losses.There are no changes in liabilities during this year and there are no additional contributions or distributions.At the beginning of this year,the Sec.705 basis was $40,000 and the at-risk basis was $15,000.The basis on December 31 of this year based on the above information is

A partner's basis for his partnership interest can be negative.

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?

Kay and Larry each contribute property to become equal partners in the KL General Partnership.Kay contributes office furniture with an adjusted basis of $40,000 and an FMV of $50,000,which she has depreciated using MACRS.Larry contributes land with a basis of $60,000 and an FMV of $50,000,which he had been holding as an investment.The partnership will use the land as a parking lot for their business. a)What is the partnership's basis in each of the two pieces of property? b)If the land that Larry contributed is sold four years after the contribution for $45,000,what is the amount and character of the gain or loss which Larry should report?

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?

Miguel has a 50% interest in partnership capital,profits,and losses.The basis for his partnership interest is $50,000.The partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses.Miguel receives a distribution of land that has an FMV of $40,000 and an adjusted basis of $30,000.The land is subject to a $15,000 liability,which Miguel assumes.His basis in the partnership interest following the land distribution is

Electing large partnership rules differ from other partnership rules in all of the following areas except

On December 31 of last year,Alex and Jackson become equal partners in the AJ Partnership with assets having a tax basis and FMV of $120,000.The partnership,which deals in securities,had no liabilities at the end of last year.In January of this year,Franklin contributes his investment securities with an FMV of $60,000 (purchased two years ago at a cost of $45,000)to become an equal partner in the new AJF Partnership.The securities,which are inventory to the partnership,are sold on December 15 of the current year for $90,000.What amount and character of gain from the sale of these securities should be allocated to Franklin?

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

Tracy has a 25% profit interest and a 20% loss interest in the Dupont Partnership.The Dupont Partnership reports the following income and loss items for the current year: What is Tracy's distributive share?

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.

Jangyoun sells investment land having a $30,000 basis to a partnership in which he has a 60% partnership interest.The partnership pays $26,000 (FMV)for the land.Later,the partnership sells the investment land to a nonpartner for $31,000.On the sale of the land,the partnership must recognize a

Meg and Abby are equal partners in the AM Partnership,which earns $40,000 ordinary income,$6,000 long-term capital gain (LTCG),and $2,000 Sec.1231 loss during the current year.What is the amount and character of income that must be reported on Abby's tax return for this year's partnership operations?

Identify which of the following statements is true.

The XYZ Partnership is held by ten partners who have the following capital and profits ownership of the partnership.The tax year-end used by each of the ten partners is also indicated.Assume each partner has used this year-end for at least five years. What is the required year-end for the XYZ Partnership,assuming that the business has no natural business year and has not filed a Sec.444 election?

The definition of a partnership does not include