Question 1

What are some advantages and disadvantages of making a Section 754 election?

Accepted Answer

Advantages: Without a 754 election,if a

Question 2

Before receiving a liquidating distribution,Kathy's basis in her interest in the KLM Partnership is $30,000.The distribution consists of $5,000 in money,inventory having a $1,000 basis to the partnership and a $2,000 FMV,and two parcels of undeveloped land (not held as inventory)having basis of $3,000 and $9,000 to the partnership with FMVs of $5,000 and $12,000,respectively.What is Kathy's basis in each parcel of land?

Accepted Answer

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

Question 3

The STU Partnership,an electing Large Partnership,has no passive activities and reports the following transactions for the year: net long-term capital losses $50,000,Sec.1231 gain $60,000,ordinary income $20,000,charitable contributions $15,000,and tax-exempt income $2,000.How much will be reported as long-term capital gains to its partners?

Accepted Answer

A) $0 
B) $10,000 
C) $50,000 
D) $60,000 
A) $0 
B) $10,000 
C) $50,000 
D) $60,000

Question 4

Identify which of the following statements is true.

Accepted Answer

A) On December 31 of the current year,Max Curcio's adjusted basis for his interest in the Maduro & Motta Partnership is $36,000.Maduro & Motta distributes cash of $6,000 and a parcel of land held as an investment to Curcio in liquidation of his entire interest in the partnership.The land has an adjusted basis of $18,000 to the partnership and an FMV of $42,000.Curcio's basis in the land is $18,000. 
B) Jake has a basis in his partnership interest of $40,000 before receiving a liquidating distribution of $5,000 cash,inventory with a basis of $4,000 and an FMV of $5,000,and land with a basis of $3,000 and an FMV of $6,000.Jake will receive no further distributions.He can recognize a loss of $28,000 at the time the liquidating distribution is received. 
C) A partner's holding period for a partnership interest is never considered when determining the holding period for property distributed in a liquidating distribution. 
D) All of the above are false. 
A) On December 31 of the current year,Max Curcio's adjusted basis for his interest in the Maduro & Motta Partnership is $36,000.Maduro & Motta distributes cash of $6,000 and a parcel of land held as an investment to Curcio in liquidation of his entire interest in the partnership.The land has an adjusted basis of $18,000 to the partnership and an FMV of $42,000.Curcio's basis in the land is $18,000. 
B) Jake has a basis in his partnership interest of $40,000 before receiving a liquidating distribution of $5,000 cash,inventory with a basis of $4,000 and an FMV of $5,000,and land with a basis of $3,000 and an FMV of $6,000.Jake will receive no further distributions.He can recognize a loss of $28,000 at the time the liquidating distribution is received. 
C) A partner's holding period for a partnership interest is never considered when determining the holding period for property distributed in a liquidating distribution. 
D) All of the above are false.

Question 5

A partnership cannot recognize a gain or loss on a current distribution.

Accepted Answer

A) True 
 B)False

Question 6

The HMS Partnership,a cash method of accounting entity,has the following balance sheet at December 31 of last year:

Sam,who has a one-third interest in profits,losses,and liabilities,sells his partnership interest to Beverly,for $77,000 cash on January 1 of this year.Sam's basis in his partnership interest (which,of course,includes a share of partnership liabilities)at the time of the sale was $17,000.In addition,Beverly assumes Sam's share of the partnership liabilities.What is the amount and character of the gain that Sam will recognize from this sale?

Accepted Answer

Amount realized = $77,000 +$10,000 liabi

Question 7

The AB Partnership has a machine with an FMV of $25,000 and a basis of $20,000.The partnership has taken an $8,000 depreciation on the machine.The unrealized receivable related to the machine is

Accepted Answer

A) $0. 
B) $5,000. 
C) $8,000. 
D) $20,000. 
A) $0. 
B) $5,000. 
C) $8,000. 
D) $20,000.

Question 8

Quinn and Pamela are equal partners in the QP Partnership.On December 30 of the current year,the QP Partnership agrees to liquidate Quinn's partnership interest for a cash payment on December 30 of each of the next five years.What tax issues should Quinn and Pamela consider with respect to the liquidation of Quinn's partnership interest?

Accepted Answer

•Does the partnership terminate for tax

Question 9

Ten years ago,Latesha acquired a one-third interest in Dana Associates,a partnership,for $26,000 cash.This year,Latesha's entire interest in the partnership is liquidated when her basis is $24,000.Dana's assets consist of the following: cash,$20,000;inventory with a basis of $46,000 and an FMV of $40,000.Dana has no liabilities.Latesha receives the cash of $20,000 in liquidation of her entire interest.What is Latesha's recognized loss on the liquidation of her interest in Dana?

Accepted Answer

A) $0 
B) $4,000 long-term capital loss 
C) $4,000 short-term capital loss and $2,000 ordinary loss 
D) $4,000 long-term capital loss and $2,000 ordinary loss 
A) $0 
B) $4,000 long-term capital loss 
C) $4,000 short-term capital loss and $2,000 ordinary loss 
D) $4,000 long-term capital loss and $2,000 ordinary loss

Question 10

John has a basis in his partnership interest of $30,000.He receives a current distribution of $6,000 cash,unrealized receivables (FMV $11,000,basis $10,000),inventory (FMV $8,000,basis $4,000),and investment land (FMV $7,000,basis $6,000).The partners' relative interest in the Sec.751 assets do not change as a result of the current distribution.His basis in the land is

Accepted Answer

A) $5,000. 
B) $6,000. 
C) $7,000. 
D) $10,000. 
A) $5,000. 
B) $6,000. 
C) $7,000. 
D) $10,000.

Question 11

In a current distribution,the partner's basis in the partnership interest is reduced by the amount of money received and by the partnership's bases in the distributed property.

Accepted Answer

A) True 
 B)False

Question 12

Bart has a partnership interest with a $32,000 basis.He receives a current distribution of $6,000 cash,unrealized receivables (FMV $9,000,basis $10,000),inventory (FMV $8,000,basis $4,000),investment land (FMV $7,000,basis $4,000),and building (FMV $20,000,basis $8,000).No depreciation recapture applies with respect to the building.The partners' relative interests in the Sec.751 assets do not change as a result of the current distribution.Bart's basis in the building is

Accepted Answer

A) $3,000. 
B) $4,000. 
C) $6,000. 
D) $8,000. 
A) $3,000. 
B) $4,000. 
C) $6,000. 
D) $8,000.

Question 13

Carlos has a basis in his partnership interest of $30,000.He receives a current distribution of $6,000 cash,unrealized receivables (FMV $11,000,basis $10,000),inventory (FMV $8,000,basis $4,000),land held as an investment (FMV $7,000,basis,$6,000),and building (FMV $21,000,basis $9,000).The partners' relative interests in the Sec.751 assets do not change as a result of the current distribution.Carlos's basis in the building is

Accepted Answer

A) $2,500. 
B) $6,000. 
C) $7,500. 
D) $9,000. 
A) $2,500. 
B) $6,000. 
C) $7,500. 
D) $9,000.

Question 14

Rod owns a 65% interest in the RRR Partnership,a general partnership,which he sells to the two remaining partners - Roger and Regis.The three partners have agreed that Rod will receive $160,000 in cash from the sale.Rod's basis in the partnership interest before the sale is $125,000,which includes his $35,000 share of partnership recourse liabilities.The partnership has assets with a $310,000 FMV and a $210,000 adjusted basis.What issues should Rod,Roger,and Regis consider before this sale takes place?

Accepted Answer

Roger and Regis should consider the foll

Question 15

Which of the following statements is correct?

Accepted Answer

A) A partnership may make an annual election to adjust the basis of its assets upon the sale of a partnership interest. 
B) The Sec.754 election applies to both sales and distributions. 
C) The Sec.754 election applies to only current and nonliquidating distributions. 
D) A partnership can revoke a Sec.754 election every 5 years. 
A) A partnership may make an annual election to adjust the basis of its assets upon the sale of a partnership interest. 
B) The Sec.754 election applies to both sales and distributions. 
C) The Sec.754 election applies to only current and nonliquidating distributions. 
D) A partnership can revoke a Sec.754 election every 5 years.

Question 16

For tax purposes,a partner who receives retirement payments ceases to be regarded as a partner

Accepted Answer

A) on the last day of the taxable year in which the partner retires. 
B) on the last day of the month in which the partner retires. 
C) on the day on which the partner retires. 
D) only after the partner's last payment is received. 
A) on the last day of the taxable year in which the partner retires. 
B) on the last day of the month in which the partner retires. 
C) on the day on which the partner retires. 
D) only after the partner's last payment is received.

Question 17

Tony sells his one-fourth interest in the WindyCity Partnership to Bill for $100,000 cash when the partnership's assets are as follows:
   
The partnership has no liabilities on the sale date.Tony's basis in his partnership interest on the date of the sale is $60,000.What is the amount of gain realized by Tony on the sale of his partnership interest?

Accepted Answer

The answer of Tony sells his one-fourth interest in the...

Question 18

If a partnership asset with a deferred precontribution gain is distributed within seven years of acquisition in a nonliquidating distribution to a partner who did not contribute the asset,the precontribution gain must be recognized by the contributing partner.

Accepted Answer

A) True 
 B)False

Question 19

Han purchases a 25% interest in the CHOP Partnership from Huang for $600,000.The partnership has assets with a basis of $1,600,000.What is the amount of the basis adjustment,if the partnership has a 754 election in place?

Accepted Answer

A) $0 
B) $150,000 increase in Han's basis in his partnership interest 
C) $200,000 increase in Han's share of the basis in partnership assets 
D) $1,000,000 increase in partnership assets 
A) $0 
B) $150,000 increase in Han's basis in his partnership interest 
C) $200,000 increase in Han's share of the basis in partnership assets 
D) $1,000,000 increase in partnership assets

Question 20

The ABC Partnership owns the following assets on December 31.
 
The indication that ABC owns substantially appreciated inventory is

Accepted Answer

A) the total FMV of all assets except cash is greater than their total basis. 
B) the FMV of all assets except land is $90,000 while their bases is $40,000. 
C) the FMV of the inventory is $30,000 while its adjusted basis is $20,000. 
D) the FMV of the inventory and unrealized receivables is $70,000 while their adjusted bases is $20,000. 
A) the total FMV of all assets except cash is greater than their total basis. 
B) the FMV of all assets except land is $90,000 while their bases is $40,000. 
C) the FMV of the inventory is $30,000 while its adjusted basis is $20,000. 
D) the FMV of the inventory and unrealized receivables is $70,000 while their adjusted bases is $20,000.

What are some advantages and disadvantages of making a Section 754 election?

Identify which of the following statements is true.

A partnership cannot recognize a gain or loss on a current distribution.

The AB Partnership has a machine with an FMV of $25,000 and a basis of $20,000.The partnership has taken an $8,000 depreciation on the machine.The unrealized receivable related to the machine is

In a current distribution,the partner's basis in the partnership interest is reduced by the amount of money received and by the partnership's bases in the distributed property.

Which of the following statements is correct?

For tax purposes,a partner who receives retirement payments ceases to be regarded as a partner

If a partnership asset with a deferred precontribution gain is distributed within seven years of acquisition in a nonliquidating distribution to a partner who did not contribute the asset,the precontribution gain must be recognized by the contributing partner.

Han purchases a 25% interest in the CHOP Partnership from Huang for $600,000.The partnership has assets with a basis of $1,600,000.What is the amount of the basis adjustment,if the partnership has a 754 election in place?

The ABC Partnership owns the following assets on December 31. The indication that ABC owns substantially appreciated inventory is

Tax Research

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The Corporate Income Tax

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Other Corporate Tax Levies

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Corporate Acquisitions and Reorganizations

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Exam 10: Special Partnership Issues

What are some advantages and disadvantages of making a Section 754 election?

Identify which of the following statements is true.

A partnership cannot recognize a gain or loss on a current distribution.

The AB Partnership has a machine with an FMV of $25,000 and a basis of $20,000.The partnership has taken an $8,000 depreciation on the machine.The unrealized receivable related to the machine is

In a current distribution,the partner's basis in the partnership interest is reduced by the amount of money received and by the partnership's bases in the distributed property.

Which of the following statements is correct?

For tax purposes,a partner who receives retirement payments ceases to be regarded as a partner

If a partnership asset with a deferred precontribution gain is distributed within seven years of acquisition in a nonliquidating distribution to a partner who did not contribute the asset,the precontribution gain must be recognized by the contributing partner.

Han purchases a 25% interest in the CHOP Partnership from Huang for $600,000.The partnership has assets with a basis of $1,600,000.What is the amount of the basis adjustment,if the partnership has a 754 election in place?

The ABC Partnership owns the following assets on December 31. The indication that ABC owns substantially appreciated inventory is

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

Partnership Formation and Operation

US Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters