Question 1

Which of the following is a valid reason for making a 754 election?

Accepted Answer

A)  An incoming partner pays more for a partnership interest that his or her proportionate share of partnership assets. 
B)  Partners are able to increase their basis in the partnership interest upon the sale of a partnership interest. 
C)  Partnerships can increase, but not decrease, their basis in partnership assets. 
D)  A partnership can reduce its basis in assets upon cash distributions to partners. 
A)  An incoming partner pays more for a partnership interest that his or her proportionate share of partnership assets. 
B)  Partners are able to increase their basis in the partnership interest upon the sale of a partnership interest. 
C)  Partnerships can increase, but not decrease, their basis in partnership assets. 
D)  A partnership can reduce its basis in assets upon cash distributions to partners.

Question 2

Identify which of the following statements is false.

Accepted Answer

A)  On June 30 of the current year, James Roe sells his interest in the Roe & Doe Partnership for $30,000. Roe's adjusted basis in Roe & Doe at June 30 is $7,500 before apportionment of any partnership income for the current year. The Roe & Doe Partnership uses the calendar year as its tax year and has no liabilities on June 30. Roe's distributive share of partnership income up to June 30 is $22,500. Roe acquired his interest in the partnership five years ago. Roe will have a long-term capital gain on the sale of his interest of $22,500. 
B)  Section 751 assets include all inventory and all unrealized receivables in a sale or exchange situation. 
C)  When a partnership interest is sold, the buyer and seller can allocate the sale price among the Sec. 751 assets and non-Sec. 751 assets in any reasonable manner. 
D)  Statements B and C are true. 
A)  On June 30 of the current year, James Roe sells his interest in the Roe & Doe Partnership for $30,000. Roe's adjusted basis in Roe & Doe at June 30 is $7,500 before apportionment of any partnership income for the current year. The Roe & Doe Partnership uses the calendar year as its tax year and has no liabilities on June 30. Roe's distributive share of partnership income up to June 30 is $22,500. Roe acquired his interest in the partnership five years ago. Roe will have a long-term capital gain on the sale of his interest of $22,500. 
B)  Section 751 assets include all inventory and all unrealized receivables in a sale or exchange situation. 
C)  When a partnership interest is sold, the buyer and seller can allocate the sale price among the Sec. 751 assets and non-Sec. 751 assets in any reasonable manner. 
D)  Statements B and C are true.

Question 3

Quinn and Pamela are equal partners in the QP Partnership.On December 30 of the current year,the QP Partnership agrees to liquidate Quinn's partnership interest for a cash payment on December 30 of each of the next five years.What tax issues should Quinn and Pamela consider with respect to the liquidation of Quinn's partnership interest?

Accepted Answer

• Does the partnership terminate for tax

Question 4

Patrick purchases a one-third interest in the PPP partnership for $600,000.The partnership has assets with a value of $1,500,000.PPP has a 754 election in effect.What is the amount of the basis adjustment?

Accepted Answer

A)  $0 
B)  $300,000 increase in the basis of partnership assets 
C)  $100,000 increase in Patrick's basis in the partnership assets 
D)  $100,000 increase in Patrick's share of the basis in the partnership assets 
A)  $0 
B)  $300,000 increase in the basis of partnership assets 
C)  $100,000 increase in Patrick's basis in the partnership assets 
D)  $100,000 increase in Patrick's share of the basis in the partnership assets

Question 5

In a current distribution,the partner's basis in the partnership interest is reduced by the amount of money received and by the partnership's bases in the distributed property.

Accepted Answer

A) True 
 B)False

Question 6

The definition of "unrealized receivable" does not include the

Accepted Answer

A)  right to payment for services performed by a cash-basis taxpayer. 
B)  recapture potential on Sec. 1245 property. 
C)  recapture potential on Sec. 1250 property. 
D)  right to payment for services performed by an accrual-basis taxpayer. 
A)  right to payment for services performed by a cash-basis taxpayer. 
B)  recapture potential on Sec. 1245 property. 
C)  recapture potential on Sec. 1250 property. 
D)  right to payment for services performed by an accrual-basis taxpayer.

Question 7

Jerry has a $50,000 basis for his interest in JJ Partnership before receiving a current distribution consisting of $8,000 in money,accounts receivable having a zero basis to the partnership,and land having a $28,000 basis to the partnership.What will Jerry's basis be in these assets?

Accepted Answer

Generally,the partner's basis

Question 8

Steve sells his 20% partnership interest having a $28,000 basis to Nancy for $40,000 cash.At the time of the sale,the partnership has no liabilities and its assets are as follows:   The receivables and inventory are Sec.751 assets.There is no agreement concerning the allocation of the sales price.Steve must recognize

Accepted Answer

A)  no gain or loss. 
B)  $12,000 ordinary income. 
C)  $12,000 capital gain. 
D)  $14,000 ordinary income and $2,000 capital loss. 
A)  no gain or loss. 
B)  $12,000 ordinary income. 
C)  $12,000 capital gain. 
D)  $14,000 ordinary income and $2,000 capital loss.

Question 9

What are the advantages of a firm being formed as a limited liability company (LLC)instead of as a limited partnership?

Accepted Answer

From a legal standpoint,all the owners o

Question 10

If a partnership chooses to form an LLC,under the check-the-box rules,and assuming no elections are made,the entity will be taxed as

Accepted Answer

A)  a partnership if it has more than one member. 
B)  an S corporation. 
C)  a C corporation. 
D)  Unable to determine from the facts presented. 
A)  a partnership if it has more than one member. 
B)  an S corporation. 
C)  a C corporation. 
D)  Unable to determine from the facts presented.

Question 11

For tax purposes,a partner who receives retirement payments ceases to be regarded as a partner

Accepted Answer

A)  on the last day of the taxable year in which the partner retires. 
B)  on the last day of the month in which the partner retires. 
C)  on the day on which the partner retires. 
D)  only after the partner's last payment is received. 
A)  on the last day of the taxable year in which the partner retires. 
B)  on the last day of the month in which the partner retires. 
C)  on the day on which the partner retires. 
D)  only after the partner's last payment is received.

Question 12

A limited liability company is a form of business entity that combines the legal benefits of the corporate form with the tax benefits of the partnership form.

Accepted Answer

A) True 
 B)False

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

The ABC Partnership owns the following assets on December 31.   The indication that ABC owns substantially appreciated inventory is

Accepted Answer

A)  the total FMV of all assets except cash is greater than their total basis. 
B)  the FMV of all assets except land is $90,000 while their bases is $40,000. 
C)  the FMV of the inventory is $30,000 while its adjusted basis is $20,000. 
D)  the FMV of the inventory and unrealized receivables is $70,000 while their adjusted bases is $20,000. 
A)  the total FMV of all assets except cash is greater than their total basis. 
B)  the FMV of all assets except land is $90,000 while their bases is $40,000. 
C)  the FMV of the inventory is $30,000 while its adjusted basis is $20,000. 
D)  the FMV of the inventory and unrealized receivables is $70,000 while their adjusted bases is $20,000.

Question 15

Helmut contributed land with a basis of $5,000 and an FMV of $10,000 to the HG Partnership five years ago to acquire a 50% partnership interest.This year the land is distributed to another partner,Gail,when its FMV is $11,000.No other distributions have been made since Helmut became a partner.When the land is distributed to Gail,Helmut recognizes a gain of

Accepted Answer

A)  $0. 
B)  $2,500. 
C)  $3,000. 
D)  $5,000. 
A)  $0. 
B)  $2,500. 
C)  $3,000. 
D)  $5,000.

Question 16

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 17

Susan contributed land with a basis of $6,000 and an FMV of $10,000 to the SH Partnership two years ago to acquire her partnership interest.This year,the land is distributed to Harry when its FMV is $11,000.No other distributions have been made since Susan became a partner.When the land is distributed,the partnership's basis in the land immediately before distribution is increased by

Accepted Answer

A)  $0. 
B)  $1,000. 
C)  $4,000. 
D)  $5,000. 
A)  $0. 
B)  $1,000. 
C)  $4,000. 
D)  $5,000.

Question 18

Tony sells his one-fourth interest in the WindyCity Partnership to Bill for $100,000 cash when the partnership's assets are as follows:
   The partnership has no liabilities on the sale date.Tony's basis in his partnership interest on the date of the sale is $60,000.What are the amount and character of Tony's gain?

Accepted Answer

@#IMG-DLM& Since the unrealized receivab

Question 19

The STU Partnership,an electing Large Partnership,has no passive activities and reports the following transactions for the year: net long-term capital losses $50,000,Sec.1231 gain $60,000,ordinary income $20,000,charitable contributions $15,000,and tax-exempt income $2,000.How much will be reported as ordinary income to its partners?

Accepted Answer

A)  $5,000 
B)  $17,000 
C)  $20,000 
D)  $22,000 
A)  $5,000 
B)  $17,000 
C)  $20,000 
D)  $22,000

Question 20

The AB,BC,and CD Partnerships merge into the ABCD Partnership.AB (owned by Austin and Ben)contributes assets worth $100,000.BC (owned by Ben and Charlie)contributes assets worth $200,000.CD (owned by Charlie and Dennis)contributes assets worth $300,000.The capital and profits interest in ABCD is owned by: Austin,10%; Ben,30%; Charlie,25%; and Dennis,35%.ABCD Partnership is a continuation of

Accepted Answer

A)  AB. 
B)  BC. 
C)  CD. 
D)  none of the partnerships. 
A)  AB. 
B)  BC. 
C)  CD. 
D)  none of the partnerships.

Which of the following is a valid reason for making a 754 election?

Identify which of the following statements is false.

Patrick purchases a one-third interest in the PPP partnership for $600,000.The partnership has assets with a value of $1,500,000.PPP has a 754 election in effect.What is the amount of the basis adjustment?

In a current distribution,the partner's basis in the partnership interest is reduced by the amount of money received and by the partnership's bases in the distributed property.

The definition of "unrealized receivable" does not include the

Jerry has a $50,000 basis for his interest in JJ Partnership before receiving a current distribution consisting of $8,000 in money,accounts receivable having a zero basis to the partnership,and land having a $28,000 basis to the partnership.What will Jerry's basis be in these assets?

What are the advantages of a firm being formed as a limited liability company (LLC)instead of as a limited partnership?

If a partnership chooses to form an LLC,under the check-the-box rules,and assuming no elections are made,the entity will be taxed as

For tax purposes,a partner who receives retirement payments ceases to be regarded as a partner

A limited liability company is a form of business entity that combines the legal benefits of the corporate form with the tax benefits of the partnership form.

Identify which of the following statements is true.

The ABC Partnership owns the following assets on December 31. The indication that ABC owns substantially appreciated inventory is

A partnership terminates for federal income tax purposes if

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

US Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

US Taxation of Foreign-Related Transactions

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Exam 10: Special Partnership Issues

Which of the following is a valid reason for making a 754 election?

Identify which of the following statements is false.

Patrick purchases a one-third interest in the PPP partnership for $600,000.The partnership has assets with a value of $1,500,000.PPP has a 754 election in effect.What is the amount of the basis adjustment?

In a current distribution,the partner's basis in the partnership interest is reduced by the amount of money received and by the partnership's bases in the distributed property.

The definition of "unrealized receivable" does not include the

Jerry has a $50,000 basis for his interest in JJ Partnership before receiving a current distribution consisting of $8,000 in money,accounts receivable having a zero basis to the partnership,and land having a $28,000 basis to the partnership.What will Jerry's basis be in these assets?

What are the advantages of a firm being formed as a limited liability company (LLC)instead of as a limited partnership?

If a partnership chooses to form an LLC,under the check-the-box rules,and assuming no elections are made,the entity will be taxed as

For tax purposes,a partner who receives retirement payments ceases to be regarded as a partner

A limited liability company is a form of business entity that combines the legal benefits of the corporate form with the tax benefits of the partnership form.

Identify which of the following statements is true.

The ABC Partnership owns the following assets on December 31. The indication that ABC owns substantially appreciated inventory is

A partnership terminates for federal income tax purposes if

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

US Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

US Taxation of Foreign-Related Transactions

Filters