Exam 9: Partnership Formation and Operation

In January of this year,Arkeva,a calendar-year taxpayer,receives a $50,000 guaranteed payment from NFR Partnership.NFR deducted the payment during its tax year ending November 30 of last year.What tax year must Arkeva report her guaranteed payment in?

Bao had investment land that he purchased in 1990 for $80,000.Two years ago,when the land was contributed to a partnership,the FMV was $50,000.The land is inventory in the hands of the partnership.The partnership then sells the land in the current year for $46,000.The partnership's recognized loss is

David contributes investment land with a basis of $24,000 and an FMV of $40,000 to a partnership for a 10% interest in partnership capital,profits,and losses.The land is subject to a $30,000 recourse liability,which is assumed by the partnership.The partnership has other recourse liabilities of $18,000.Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses.David must recognize a

Brent is a limited 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?

Jason,a lawyer,provided legal services for the employees of the ABC Partnership during the first six months of the current year.In exchange,he received a 2% capital and profits interest in the partnership.The value of the interest is $5,000.What are the tax consequences to Jason,the ABC Partnership,and the employees of ABC?

Tracy has a 25% profit interest and a 20% loss interest in the Dupont Partnership.The Dupont Partnership reports the following income and loss items for the current year: What is Tracy's distributive share?

Doug purchases a 20% interest in the Quix Partnership for $10,000 on January 1,2019,and begins to materially participate in the partnership's business.The Quix Partnership uses the calendar year as its tax year.At the time of the purchase,the Quix Partnership has $4,000 in liabilities,and Doug's share is 20%.What is Doug's basis in his partnership interest on January 1,2010?

What is the tax impact of guaranteed payments on the partner and the partnership?

Dan purchases a 25% interest in the Haymarket Partnership for $20,000 on January 1,2010,and begins to materially participate in the partnership's business.The Haymarket Partnership uses the calendar year as its tax year.At the time of the purchase,the Haymarket Partnership has $2,000 in liabilities,and Dan's share is 25%.During the year,the Haymarket Partnership incurs $8,000 in losses and its liabilities increase by $4000.What is Dan's basis in his partnership interest on December 31,2010?

When the PDQ Partnership formed,it knew it had a good product,but it was a bit short on cash.After seeing the product,Jim,a CPA,said that he would set up an accounting system for the partnership in exchange for a 15% profits interest in the partnership.The partners agreed to this,as Jim was receiving only a profits interest and not a capital interest in the partnership.Jim's usual fee for this type of service would be approximately $5,000.What tax issues should Jim and the PDQ Partnership consider with respect to the payment made for the services?

Jane contributes land with an FMV of $100,000 and a basis of $40,000 to the Green Partnership in exchange for a 25% partnership interest.The partnership assumes the $80,000 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.

Elijah contributes securities with a $90,000 FMV (purchased in 2008 at a cost of $50,000)to become a one-third partner in the EJK Partnership on January 1 of the current year.The securities are sold on December 15 of the current year for $105,000.How much of the partnership's capital gain from the sale of these securities should be allocated to Elijah?

The Troika Partnership has an ordinary loss of $48,000 for the year.Before allocation of the loss at the end of the year,Shaad's one-third limited partnership interest has an adjusted basis of $5,000.Shaad's only other income or loss is his $30,000 salary from a factory job.What amount can Shaad deduct on his tax return as his share of the partnership's loss?

Identify which of the following statements is true.

Explain the three different limitation provisions that a partner must satisfy before a loss can be deducted.

The XYZ Partnership reports the following operating results for the current year: Tai has a 20% profits interest and a 25% loss interest in the XYZ Partnership.His distributive share of ordinary income is

On January 1,Helmut pays $2,000 for a 10% capital,profits,and loss interest in a partnership,which has recourse liabilities of $20,000.The partners share economic risk of loss from recourse liabilities in the same way they share partnership losses.In the same year,the partnership incurs losses of $6,000 and the recourse liabilities increase by $5,000.Helmut and the partnership use a calendar tax year-end.Helmut's basis at year-end is

Henry has a 30% interest in the HMS Partnership's capital,profits,and losses computed after taking into account his guaranteed payment of $40,000.In the current year,HMS reports ordinary income of $30,000 and capital gains of $60,000 before taking into account Henry's guaranteed payment.What is the amount and character of all income or loss that Henry must report as a result of partnership activities?

Samantha works 40 hours a week as a clerk in the mall and earns $28,000.In addition,she works five hours each week in the XYZ Partnership's office.Samantha,a 15% limited partner in the XYZ Partnership,has been allocated a $4,000 loss from the partnership for the current year.The basis for her interest in XYZ before accounting for current operations is $7,000.What tax issues should Samantha consider with respect to her interest in,and employment by,the XYZ Partnership?