Exam 17: Partnerships and S Corporations

Realto LLC is a tax partnership which has four equal partners.The LLC holds highly appreciated real estate in midtown Manhattan.Trina is about to purchase a 20% ownership interest in the LLC.To minimize her future tax burden as a partner,she should negotiate a Sec.754 election with the current partners.

Shelley owns a 25% interest in a qualifying S corporation.Shelley's basis in the stock was $15,000 at the beginning of the year.Shelley made no capital contributions and received no distributions during the year.Shelley loaned the S corporation $20,000 this year.The S corporation incurred a $160,000 ordinary loss this year. a.What are the amounts of Shelley's deduction and carryover of the unused loss for the year? b.What is the amount of Shelley's basis in the stock at the end of year one? c.If the S Corporation earned net income of $200,000 in year two,what is the amount of Shelley's stock basis at the end of year two?

Losses are disallowed on sales or exchanges between a partner and the partnership if the partner owns directly or indirectly more than a 50% interest in the capital or profits.

Longhorn Partnership reports the following items at the end of the current year: What is the partnership's ordinary income? Which items are separately stated?

DAD Partnership has one corporate partner,Domino Corporation,with a fiscal year-end of June 30.Domino has a 30% interest in DAD.The other partners are individuals with a calendar year for tax purposes,none of whom has a 5% or more interest in DAD Partnership.What are DAD Partnership's choices with respect to selecting a tax year?

If a partner contributes inventory to the partnership in exchange for a partnership interest,the holding period for the partnership interest begins on the date the inventory was acquired by the transferor partner.

A partnership is generally required to use the tax year of one or more partners who own more than a 50% interest in partnership profits and capital.

Limited liability of partners or members is an advantage of all the following with the exception of

At the beginning of this year,Edmond and Samuel were equal partners in a partnership that uses the calendar year as its tax year.On October 1,this year,Joan contributed $48,000 cash for a one-third interest in the partnership.The interests of both Edmond and Samuel drop to one-third.The partnership reports a $36,000 ordinary loss for the current tax year ending December 31.The loss allocation to Samuel is (assume the elective proration method with a monthly convention)

Lance transferred land having a $180,000 FMV and a $105,000 adjusted basis,which is subject to a $150,000 mortgage in exchange for a one-third interest in the Trois Partnership.Lance acquired the land in 2010.The partnership owes no other liabilities.Lance,Rhonda,and Zach share profits and losses equally and each has a one-third interest in partnership capital.The tax effect to Lance is