Exam 17: Partnerships and S Corporations

Which of the following statements regarding the Sec.754 adjustment is incorrect?

Ezinne transfers land with an adjusted basis of $50,000 and a FMV of $95,000 to a new business in exchange for a 50% ownership interest.The land is subject to a $60,000 mortgage which the business will assume.The business has no other liabilities outstanding.Indicate the amount of gain recognized by Ezinne due to this exchange if the building is (1) a corporation and (2) a partnership.Assume Sec.351 is satisfied in the case of the corporation and Sec.721 is satisfied in the case of the partnership.

Separately stated items are allocated to the S corporation shareholders based on the number of shares of stock owned on the last day of the S corporation's taxable year.

A CPA firm,operating as a partnership,can become an electing large partnership as long as it has at least 100 partners and files the appropriate election.

For each of the following independent cases below,indicate whether the entity will be taxed as an S corporation or a C corporation for the respective period. a.Richards Corporation,uses the calendar year as its tax year.It files an S election on March 31,2017.If no reasonable cause is shown,how will Richards Corporation be treated for tax purposes in 2017? b.Shareholders owning more than 50% of the stock of Harper Corporation,a qualifying calendar-year S corporation,consent to a voluntary revocation statement filed by the corporation on March 12,2017.How will Harper Corporation be treated for tax purposes in 2017? c.Shareholders owning more than 50% of the stock of Hazelwood Corporation,a qualifying calendar-year S corporation,consent to a voluntary revocation statement filed by the corporation on March 12,2017.The prospective termination date is July 1,2017.How will Hazelwood Corporation be treated for tax purposes in 2017? d.One of the shareholders of Omni Corporation,a calendar-year S corporation,sells his stock to a Canadian individual on July 8,2017.

S corporations are a common form for small businesses because they offer more flexibility than partnerships in terms of ownership structure and allocation of income.

Ben is a 30% partner in a partnership.The partnership guarantees Ben payments of $25,000 for the year.If the partnership has ordinary income of $15,000 before adjustment for the guaranteed payment,Ben must report

Assuming extensions are not filed,tax returns for calendar-year S corporations and partnerships are both due on April 15.

Atiqa receives a nonliquidating distribution of land from her partnership.The partnership purchased the land five years ago for $20,000.At the time of the distribution,it is worth $28,000.Prior to the distribution,Atiqa's basis in her partnership interest is $37,000.Atiqa's basis in the distributed land and her post-distribution basis in her partnership interest are

If a partner contributes property to a partnership,and that property is subject to a liability,the noncontributing partners increase the basis of their partnership interests by their share of the partnership liabilities that were transferred to the partnership.

Jamahl has a 65% interest in a partnership.Jamahl sells land to the JK 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.Two years later the partnership sells the land for $123,000.Due to the sale,the partnership will recognize

The income of a single member LLC is taxed to its owner under the sole proprietorship rules if no election to be taxed as a corporation is made.

A shareholder's deduction for ordinary losses and separately stated items cannot exceed his basis for the S corporation stock plus the debt basis for the shareholder loans made to the corporation and corporate-level liabilities personally guaranteed by the shareholder.

An S corporation recognizes gain or loss if it distributes property other than money to its shareholders.

All of the following statements are true regarding nonliquidating distributions of a partnership except

All the following are types of pass-through entities except

Discuss the concept of partnership guaranteed payments.

Explain the difference between expenses of organizing a partnership and expenses of syndicating a partnership.

The partnership's assumption of a liability from a partner is treated as a cash distribution to the partner whose liability is assumed,which decreases his basis in the partnership.

A shareholder's basis for the S corporation stock is adjusted for ordinary income or loss and separately stated items that flow through to the shareholders as well as for additional capital contributions by shareholders and distributions to shareholders.