Exam 17: Partnerships and S Corporations

Eva is the sole shareholder of an S corporation.Eva gifts half of her S corporation stock to Adam,her newborn son.The S corporation is a highly profitable manufacturing company.The pass-through of the ordinary income to Adam can be subject to tax at his parents' marginal rate.

Mia is a 50% partner in a partnership with a beginning of the year adjusted basis in her partnership interest of $50,000.For the current year,no distributions are made to partners,and there is no change in partnership liabilities.The partnership incurred a $140,000 ordinary loss for the year.How does Mia treat her loss in excess of basis?

How does an electing large partnership differ from a regular partnership?

A shareholder sells his S corporation stock and realizes a $500,000 gain.The stock had been held five years.Which of the following statements most completely describes the character of the gain?

Which of the following statements is correct,assuming that an extension is not requested?

Jamahl has a 65% interest in a partnership.Jamahl sells land to the partnership for $70,000.Prior to the sale,the land had a FMV of $70,000 and an adjusted basis of $90,000 to Jamahl.Due to the sale,Jamahl will recognize

S status can be elected if 50% of all shareholders consent to the S corporation election on the date of the S corporation election.

Kuda exchanges property with a FMV of $630,000 and an adjusted basis of $450,000 in exchange for a one-third interest in a partnership.The property is subject to a mortgage with a principal balance of $300,000 which the partnership assumes.As a result of Kuda joining the partnership,Alejandro,a pre-existing partner,now has a one-third interest in the partnership.Alejandro will adjust his basis to

Torrie and Laura form a partnership in which they are equal partners.Torrie contributes $100,000 cash.Laura contributes $40,000 cash and a painting worth $60,000.Laura purchased the painting three years ago for $45,000.In two years the partnership sells the painting for $80,000. a.What is the partnership's basis in the painting? b. When the painting is sold,how much gain is allocated to each partner?

An S corporation distributes land to its shareholders.The land has a $60,000 basis and a $90,000 FMV.The basis of the land to the shareholder is

All of the following could file partnership tax returns except

A partnership's liabilities have increased by year-end.As a result,partners' bases in their partnership interests will increase.

John contributes land having $110,000 FMV and a $90,000 adjusted basis which is subject to a $60,000 mortgage in exchange for a one-third interest in the AJK Partnership.The partnership owes no other liabilities.After the contribution,Abby,John,and Kent share profits and losses equally and each has a one-third interest in the partnership capital.John's basis in the partnership interest is

Richard has a 50% interest in a partnership,and he materially participates in the partnership's business.Richard's adjusted basis in the partnership was $60,000 at the beginning of the year,including his share of partnership liabilities.There were no distributions to Richard during the year.During the current year,the partnership borrowed $160,000 from a local bank to purchase equipment needed in the business.All of the partners are personally liable for all partnership debts.The partnership incurred a $320,000 loss this year.What amount can Richard claim as a loss from the partnership on his individual tax return this year?

On January 1 of this year (assume not a leap year),Anne bought 50% of a calendar-year S corporation.Anne purchased the remaining 50% on July 1 (day 181 of the year).Anne's adjusted basis in the stock is $277,000 before any basis adjustments are taken into account.For this year,the corporation had a net operating loss of $365,000.What is the amount of the corporation's loss that Anne can deduct on her current individual income tax return?

All of the following are requirements to qualify as an S corporation with the exception of

Marisa has a 75% interest in the MM Partnership.She sells the partnership a building used in her business for $150,000.Her adjusted basis of the building was $120,000.Marisa had used straight-line depreciation.The partnership will use the building for its offices.What are the tax consequences to Marisa of this transaction?

David and Joycelyn form an equal partnership in the current year.No special allocation is provided for in the partnership agreement.During the year David contributes land having a $90,000 basis and a $100,000 FMV in exchange for the initial partnership interest.In addition,the partnership earns $50,000 of ordinary income while partnership liabilities increase from zero to $30,000 by the end of the tax year.The partnership earns $20,000 of tax-exempt interest during the year.David's basis at the end of the current year is

Worthy Corporation elected to be taxed as an S corporation on January 1,of last year,effective last year.It had previously been a C corporation.On the effective date of the S election,Worthy had land with a $70,000 basis and a $210,000 FMV.No net unrealized losses exist on the date of the S corporation election.The land is sold this year for $250,000.The tax result of the sale by Worthy is

Discuss how the partnership form of organization or the S corporation form may be used to shift income.