Exam 9: Partnership Formation and Operation

ABC Partnership distributes $12,000 to partner Al.Al's distributive share of partnership income is $20,000.Al is taxed on $20,000.

Jane contributes land with an FMV of $100,000 and a basis of $80,000 to the Green Partnership in exchange for a 25% partnership interest.The partnership assumes the $40,000 mortgage on the land.Mary has a 25% share of partnership liabilities.The Green Partnership has $8,000 in liabilities immediately before Jane's contribution.What is Jane's basis in her partnership interest?

Identify which of the following statements is true.

A partner's share of nonrecourse debt increases that partner's share of basis.

What are the three rules and their order when determining a partnership tax year?

Briefly explain the aggregate and entity theories as they relate to partnerships.

In computing the ordinary income of a partnership,a deduction is allowed for

Identify which of the following statements is true.

David purchased a 10% capital and profits interest in a partnership this year.He does not participate in the partnership's business.David has no passive income in the current year.His distributive share of the partnership's loss is $40,000 for this year.David's Sec.705 basis in the partnership is $32,000 and his at-risk basis is $16,000 at the end of the current year.How much of the loss can David deduct on his tax return?

Brent is a general partner in BC Partnership.His distributive share of partnership income and his guaranteed payment for the year are as follows: What is his self-employment income?

Albert contributes a Sec.1231 asset to a partnership on June 1 of this year in exchange for a 10% partnership interest.He had purchased the asset on March 1,2002.His holding period for the partnership interest begins

In January,Daryl and Louis form a partnership with each contributing $75,000 in cash.The partnership agreement provides that Daryl would receive a guaranteed payment for salary of $20,000 and that partnership profits and losses (computed after deducting Daryl's salary)would be shared equally.For the year,the partnership's operations result in an $18,000 ordinary loss after payment of Daryl's guaranteed payment.The partnership has no outstanding liabilities at year-end.What is the basis amount of Daryl's partnership interest at year-end?

Dinia has agreed to provide services valued at $30,000 to the L-M Partnership.On January 1 of the current year,she is given a 20% capital and profits interest in the partnership in exchange for her services.The partnership has no liabilities at the time but has assets with a basis of $50,000 and an FMV of $70,000.What are the tax consequences to Dinia and the partnership?

For a 30% interest in partnership capital,profits,and losses,Carol contributes a machine with a basis of $40,000 and an FMV of $80,000.The partnership assumes a $70,000 recourse liability on the machine.At the time of the contribution,the partnership had recourse liabilities of $10,000.Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses.Following the contribution,Carol has

Identify which of the following statements is true.

Mike and Jennifer form an equal partnership.Mike contributes cash of $15,000 and Jennifer contributes land having a $15,000 FMV and a basis of $5,000.If the partnership sells the land three years later for $18,000,what are the tax consequences to Mike and Jennifer?

Identify which of the following statements is true.

Electing large partnership rules differ from other partnership rules in all of the following areas except

George receives a 10% limited partnership interest (capital and profits interest)in the HIJ Partnership in return for managing the partnership's rental property.The partnership interest has an FMV of $35,000.What is the amount and character of the income (if any)that George must report as a result of becoming a partner?

Charles Jordan files his income tax return on a calendar-year basis.He is a principal partner in a partnership using a tax year ending June 30.Jordan's share of the partnership's ordinary income was $24,000 for the fiscal year ending June 30 of last year and $72,000 for the fiscal year ending June 30 of the current year.Assume the partnership earned its income evenly throughout the year.How much should Jordan report on his Form 1040 for last year as his share of the partnership's ordinary income?