Question 1

Which of the following is false?

Accepted Answer

A) A large partnership must not be a service partnership. 
B) A large partnership must have fewer than 100 partners. 
C) A large partnership must not be engaged in commodity trading. 
D) A large partnership is subject to a different system of audits. 
A) A large partnership must not be a service partnership. 
B) A large partnership must have fewer than 100 partners. 
C) A large partnership must not be engaged in commodity trading. 
D) A large partnership is subject to a different system of audits.

Question 2

Guaranteed payments are always ordinary income to the recipient.

Accepted Answer

A) True 
 B)False

Question 3

Victor and Kristina decide to form VK Partnership.They will be equal partners.Victor contributes a building with a $150,000 FMV and a $105,000 adjusted basis to the partnership.The building has a $60,000 mortgage,which the partnership assumes.Kristina contributes land with a $70,000 FMV and a $95,000 adjusted basis.Kristina will manage the day-to-day activities of the partnership.She will begin to receive a guaranteed payment for her work,starting in the second year of operations,and continuing on as long as she manages the operations of the partnership.Victor and Kristina have agreed that the guaranteed payment will be $10,000 per year.What tax issues should Victor,Kristina,and the partnership consider with respect to the formation and operation of the partnership?

Accepted Answer

•Does Victor recognize any gain on the f

Question 4

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

Accepted Answer

A) $10,000. 
B) $15,000. 
C) $25,000. 
D) $40,000. 
A) $10,000. 
B) $15,000. 
C) $25,000. 
D) $40,000.

Question 5

Martin is a limited partner in a card shop.At the end of the partnership's tax year,Martin's basis in the partnership interest is $25,000 ($5,000 cash investment plus a $20,000 share of nonqualified nonrecourse financing).Martin's distributive share of partnership losses for the tax year is $33,000.Martin has $30,000 of passive income this year from other activities.How much of the $33,000 partnership loss can be used by Martin in the year of the loss?

Accepted Answer

A) $5,000 
B) $25,000 
C) $30,000 
D) $33,000 
A) $5,000 
B) $25,000 
C) $30,000 
D) $33,000

Question 6

Stella acquired a 25% interest in the STUV Partnership by contributing land having an adjusted basis of $32,000 and a fair market value of $100,000.The land was subject to a $48,000 mortgage,which was assumed by STUV.No other liabilities existed at the time of contribution.What is Stella's basis in her partnership interest?

Accepted Answer

A) $0 
B) $32,000 
C) $52,000 
D) $64,000 
A) $0 
B) $32,000 
C) $52,000 
D) $64,000

Question 7

Does the contribution of services to a partnership in exchange for an unrestricted partnership interest qualify for Sec.721 nontaxable treatment?

Accepted Answer

No.The service partner recogni

Question 8

Bob,Kara,and Mark are partners in the BKM Partnership.Bob is a 40% partner and has a June 30 tax year-end.Kara owns a 40% interest in the partnership and has a September 30 tax year-end,and Mark owns the remaining 20% interest and has an October 31 tax year-end.The partnership does not have a natural business year.What is the required tax year-end for the partnership (if no Sec.444 election is made)?

Accepted Answer

A) June 30 
B) September 30 
C) October 31 
D) December 31 
A) June 30 
B) September 30 
C) October 31 
D) December 31

Question 9

Nicholas,a 40% partner in Nedeau Partnership,gives one-half of his interest to his sister,Michelle.During the current year,Nicholas performs services for the partnership for which reasonable compensation is $80,000,but for which he accepts no pay.Nicholas and Michelle are each credited with a $100,000 distributive share,all of which is ordinary income.What are Nicholas' and Michelle's distributive share?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 10

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

Accepted Answer

A) $12,500. 
B) $20,000. 
C) $27,500. 
D) $35,000. 
A) $12,500. 
B) $20,000. 
C) $27,500. 
D) $35,000.

Question 11

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?

Accepted Answer

a)The partnership basis for the two asse

Question 12

Identify which of the following statements is true.

Accepted Answer

A) Formation of a partnership requires legal documentation. 
B) An individual engaged in the active conduct of a business must elect not to be taxed as a partnership. 
C) A partnership exists as long as there are at least two individuals or entities engaged in the active conduct of a trade or business or a financial operation,and the business is not a trust or a corporation. 
D) All of the above are false. 
A) Formation of a partnership requires legal documentation. 
B) An individual engaged in the active conduct of a business must elect not to be taxed as a partnership. 
C) A partnership exists as long as there are at least two individuals or entities engaged in the active conduct of a trade or business or a financial operation,and the business is not a trust or a corporation. 
D) All of the above are false.

Question 13

Explain the tax consequences for both the service partner and the partnership when a contribution of services is made to the partnership.

Accepted Answer

The service partner has income to the ex

Question 14

AT Pet Spa is a partnership owned equally by Travis and Ashley.The partnership had the following revenues and expenses this year.Which of the following items are separately stated? Nonseparately stated? What is each partner's distributive share of ordinary income?

Accepted Answer

Separately-stated items are th

Question 15

Identify which of the following statements is true.

Accepted Answer

A) Bob gives his 16-year-old daughter Michelle a 20% capital and profits interest in his accounting practice.She does no work for the partnership and is not involved at all with the operations of the partnership.In fact,she does not know that her dad transferred the interest in the partnership to her.If the partnership allocates an $8,000 distributive share of ordinary income to her,it is properly reported on Michelle's individual tax return. 
B) Valid family partnership partners may be subject to the "kiddie tax." 
C) Joan gives her daughter,Sarah,a 25% interest in a partnership that operates a steel mill.Sarah,age 19,was allocated $20,000 from the partnership as her share of the partnership ordinary income.The IRS will require the income to be included on Sarah's return. 
D) All of the above are false. 
A) Bob gives his 16-year-old daughter Michelle a 20% capital and profits interest in his accounting practice.She does no work for the partnership and is not involved at all with the operations of the partnership.In fact,she does not know that her dad transferred the interest in the partnership to her.If the partnership allocates an $8,000 distributive share of ordinary income to her,it is properly reported on Michelle's individual tax return. 
B) Valid family partnership partners may be subject to the "kiddie tax." 
C) Joan gives her daughter,Sarah,a 25% interest in a partnership that operates a steel mill.Sarah,age 19,was allocated $20,000 from the partnership as her share of the partnership ordinary income.The IRS will require the income to be included on Sarah's return. 
D) All of the above are false.

Question 16

Karl arranges financing for a limited partnership to purchase real estate in exchange for a 50% interest in partnership profits.Two weeks later,Karl sells the profits interest for $30,000.In this tax year,Karl must recognize

Accepted Answer

A) no gain or loss. 
B) a $30,000 short-term capital gain. 
C) a $30,000 ordinary income. 
D) a $30,000 Sec.1231 gain. 
A) no gain or loss. 
B) a $30,000 short-term capital gain. 
C) a $30,000 ordinary income. 
D) a $30,000 Sec.1231 gain.

Question 17

What is included in partnership taxable income?

Accepted Answer

Partnership taxable income includes both

Question 18

The definition of a partnership does not include

Accepted Answer

A) a syndicate. 
B) a group. 
C) a pool. 
D) All of the above are included. 
A) a syndicate. 
B) a group. 
C) a pool. 
D) All of the above are included.

Question 19

Identify which of the following statements is true.

Accepted Answer

A) The Hunter Partnership has a net long-term capital gain of $4,000 and a net short-term capital loss of $1,000 for the current tax year.The gain and loss will be netted and the partners will include their proportionate share of the $3,000 net long-term capital gain on their return. 
B) The Right Partnership sells a delivery truck and recognizes a gain of $2,000,which represents depreciation recaptured under Sec.1245.The $2,000 gain will retain its identity as a separately stated item. 
C) For tax purposes,the partnership takes a carryover basis in the contributed property that references the contributing partner's basis. 
D) All of the above are false. 
A) The Hunter Partnership has a net long-term capital gain of $4,000 and a net short-term capital loss of $1,000 for the current tax year.The gain and loss will be netted and the partners will include their proportionate share of the $3,000 net long-term capital gain on their return. 
B) The Right Partnership sells a delivery truck and recognizes a gain of $2,000,which represents depreciation recaptured under Sec.1245.The $2,000 gain will retain its identity as a separately stated item. 
C) For tax purposes,the partnership takes a carryover basis in the contributed property that references the contributing partner's basis. 
D) All of the above are false.

Question 20

Under what conditions will a special allocation of partnership depreciation be recognized? Assume the partnership has no nonrecourse liabilities.

Accepted Answer

A special allocation must be stated in t

Which of the following is false?

Guaranteed payments are always ordinary income to the recipient.

Does the contribution of services to a partnership in exchange for an unrestricted partnership interest qualify for Sec.721 nontaxable treatment?

Identify which of the following statements is true.

Explain the tax consequences for both the service partner and the partnership when a contribution of services is made to the partnership.

AT Pet Spa is a partnership owned equally by Travis and Ashley.The partnership had the following revenues and expenses this year.Which of the following items are separately stated? Nonseparately stated? What is each partner's distributive share of ordinary income?

Identify which of the following statements is true.

Karl arranges financing for a limited partnership to purchase real estate in exchange for a 50% interest in partnership profits.Two weeks later,Karl sells the profits interest for $30,000.In this tax year,Karl must recognize

What is included in partnership taxable income?

The definition of a partnership does not include

Identify which of the following statements is true.

Under what conditions will a special allocation of partnership depreciation be recognized? Assume the partnership has no nonrecourse liabilities.

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

Special Partnership Issues

US Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters

Exam 9: Partnership Formation and Operation

Which of the following is false?

Guaranteed payments are always ordinary income to the recipient.

Does the contribution of services to a partnership in exchange for an unrestricted partnership interest qualify for Sec.721 nontaxable treatment?

Identify which of the following statements is true.

Explain the tax consequences for both the service partner and the partnership when a contribution of services is made to the partnership.

AT Pet Spa is a partnership owned equally by Travis and Ashley.The partnership had the following revenues and expenses this year.Which of the following items are separately stated? Nonseparately stated? What is each partner's distributive share of ordinary income?

Identify which of the following statements is true.

Karl arranges financing for a limited partnership to purchase real estate in exchange for a 50% interest in partnership profits.Two weeks later,Karl sells the profits interest for $30,000.In this tax year,Karl must recognize

What is included in partnership taxable income?

The definition of a partnership does not include

Identify which of the following statements is true.

Under what conditions will a special allocation of partnership depreciation be recognized? Assume the partnership has no nonrecourse liabilities.

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

Special Partnership Issues

US Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters