Question 1

Which one of the following is not true about partnerships?

Accepted Answer

A) There must be two or more owners. 
B) General partners assume more risk of legal liability than limited partners. 
C) An LLC limits certain liability risks. 
D) A partnership is taxed like a corporation. 
E) All of the above are true. 
A) There must be two or more owners. 
B) General partners assume more risk of legal liability than limited partners. 
C) An LLC limits certain liability risks. 
D) A partnership is taxed like a corporation. 
E) All of the above are true. D

Question 2

Guaranteed payments made by a partnership must be made to individuals other than partners in the partnership.

Accepted Answer

A) True 
 B)False  False

Question 3

On July 1 of the current year, Ambrose was admitted to the partnership of Ambrose and Nectar. His contribution to capital consisted of 500 shares of stock in Paniculata Corporation, which he bought in 2010 for $10,000 and which had a fair market value of $50,000 on July 1 of the current year. Ambrose's interest in the partnership's capital and profits is 25 percent. On July 1 of the current year, the fair market value of the partnership's net assets (after Ambrose was admitted) was $200,000. What is Ambrose's taxable gain in the current on the exchange of stock for his partnership interest?

Accepted Answer

A) $0 gain or loss 
B) $40,000 ordinary income 
C) $40,000 long-term capital gain 
D) $40,000 Section 1231 gain 
E) None of the above 
A) $0 gain or loss 
B) $40,000 ordinary income 
C) $40,000 long-term capital gain 
D) $40,000 Section 1231 gain 
E) None of the above A

Question 4

Jordan files his income tax return on a calendar-year basis. He is the principal partner of a partnership reporting on a June 30 fiscal year end basis. Jordan's share of the partnership's ordinary income was $24,000 for the fiscal year ended June 30, 2016, and $72,000 for the fiscal year ended June 30, 2017. How much should Jordan report on his 2016 individual income tax return as his share of taxable income from the partnership?

Accepted Answer

A) $24,000 
B) $36,000 
C) $48,000 
D) $72,000 
E) None of the above 
A) $24,000 
B) $36,000 
C) $48,000 
D) $72,000 
E) None of the above

Question 5

A partnership must separately report Section 1231 gains and losses rather than including them in ordinary taxable income.

Accepted Answer

A) True 
 B)False

Question 6

Barry owns a 50 percent interest in B&B Interests, a partnership. His brother, Benny, owns a 35 percent interest in that same partnership, and the remaining 15 percent is owned by an unrelated individual. During the current year, Barry sells a rental property with a basis of $60,000 to B&B Interests for $100,000. The partnership intends to hold the rental as inventory for resale. What is the amount and nature of Barry's gain or loss on this transaction?

Accepted Answer

A) $40,000 long-term capital loss 
B) $0 gain or loss 
C) $40,000 long-term capital gain 
D) $40,000 ordinary income 
E) None of the above 
A) $40,000 long-term capital loss 
B) $0 gain or loss 
C) $40,000 long-term capital gain 
D) $40,000 ordinary income 
E) None of the above

Question 7

Nash and Ford are partners who share profits and losses equally. For the current tax year, the partnership had book income of $70,000 which included the following deductions: What amount should be reported as ordinary income on the partnership return for the current tax year?
  ​

Accepted Answer

A) $75,000 
B) $85,000 
C) $130,000 
D) $135,000 
E) None of the above 
A) $75,000 
B) $85,000 
C) $130,000 
D) $135,000 
E) None of the above

Question 8

Ownership of a partnership interest by a taxpayer's brother is considered indirect ownership by the taxpayer.

Accepted Answer

A) True 
 B)False

Question 9

Losses on transactions between a partnership and its partners are always disallowed.

Accepted Answer

A) True 
 B)False

Question 10

Debbie and Betty operate the D & B partnership. Betty, a 50 percent partner, receives a guaranteed payment of $10,000 for her services in operating the partnership. The partnership has income before the guaranteed payment of $5,000. What is the taxable income Debbie and Betty must each report from the partnership for the year?
Debbie should report income of $__________.
Betty should report income of $__________.

Accepted Answer

Debbie: $2,500 loss = 50% × ($

Question 11

Which of the following statements about partnerships is true?

Accepted Answer

A) Partnerships must file their tax returns on a calendar year basis. 
B) No gain or loss is ever recognized in transactions between partners and a partnership. 
C) Gain is never recognized by a partner on a contribution of property to a partnership. 
D) A partner's original basis in a partnership interest is equal to the basis of the property transferred (plus cash contributed) to the partnership, adjusted for any gain recognized on the transfer and reduced for liabilities assumed by the other partners. 
E) The partnership's basis in property contributed by a partner is equal to the fair market value of the property on the date of the transfer. 
A) Partnerships must file their tax returns on a calendar year basis. 
B) No gain or loss is ever recognized in transactions between partners and a partnership. 
C) Gain is never recognized by a partner on a contribution of property to a partnership. 
D) A partner's original basis in a partnership interest is equal to the basis of the property transferred (plus cash contributed) to the partnership, adjusted for any gain recognized on the transfer and reduced for liabilities assumed by the other partners. 
E) The partnership's basis in property contributed by a partner is equal to the fair market value of the property on the date of the transfer.

Question 12

Michael invests in Buxus Interests, a partnership. Michael's capital contribution to the partnership consists of $10,000 cash and equipment with an adjusted basis of $120,000 (fair market value of $150,000) subject to a nonrecourse liability of $60,000.
a.Calculate the amount that Michael is at-risk in the activity after making the above contribution?
b.If Michael's share of the partnership loss in the year after he makes the contribution is $150,000, how much of the loss may be deducted in that year (before considering the limitations on passive losses)? Assume the partnership had no other transactions.
c.If Michael has any nondeductible loss in part b, what may Michael do with the nondeductible loss?

Accepted Answer

The answer of Michael invests in Buxus Interests, a partnership....

Question 13

Jennifer has a 25 percent interest in the Aspen Aircraft partnership. Her basis in her partnership interest is $10,000 at the beginning of the year. The partnership reported the following activity for the year:
What is Jennifer's basis in her partnership interest at the end of the year?

Accepted Answer

$12,500 = $10,000 +

Question 14

The holding period of property contributed to a partnership includes the period of time that the contributor has held the property.

Accepted Answer

A) True 
 B)False

Question 15

The tax year of a partnership generally closes upon entry of a new 20% partner.

Accepted Answer

A) True 
 B)False

Question 16

During the current year, Norman contributed investment property held for over one year to the Mary Ann Partnership for a 40 percent interest in partnership capital and profits. His tax basis in the property contributed was $8,000, and the property had a fair market value of $10,000 on the date of the contribution to the partnership. What gain or loss should Norman report as a result of the contribution of the property to the partnership in exchange for the 40 percent partnership interest?

Accepted Answer

A) No gain or loss 
B) $2,000 long-term capital gain 
C) $2,000 ordinary income 
D) $10,000 long-term capital gain 
E) None of the above 
A) No gain or loss 
B) $2,000 long-term capital gain 
C) $2,000 ordinary income 
D) $10,000 long-term capital gain 
E) None of the above

Question 17

An equal partnership is formed by Rita and Gerry. Rita contributes cash of $10,000 and a building with a fair market value of $150,000, adjusted basis of $55,000, and subject to a liability of $60,000. Gerry contributes cash of $100,000. What amount of gain must Rita recognize as a result of this transaction?

Accepted Answer

A) $95,000 
B) $35,000 
C) $5,000 
D) $0 
E) None of the above 
A) $95,000 
B) $35,000 
C) $5,000 
D) $0 
E) None of the above

Question 18

There is no general partner required in a limited liability company (LLC).

Accepted Answer

A) True 
 B)False

Question 19

Loretta contributes property to a partnership in exchange for a 25 percent partnership interest. The property contributed has a fair market value of $45,000 and a basis of $35,000 on the date of the contribution to the partnership. In addition, Loretta receives a 10 percent partnership interest, valued at $18,000, in exchange for services rendered to the partnership. What is Loretta's basis in her partnership interest, immediately after these transactions?

Accepted Answer

A) $35,000 
B) $45,000 
C) $53,000 
D) $63,000 
E) None of the above 
A) $35,000 
B) $45,000 
C) $53,000 
D) $63,000 
E) None of the above

Question 20

In general, income is recognized by the partner when a partnership interest is received in exchange for services rendered to the partnership.

Accepted Answer

A) True 
 B)False

Which one of the following is not true about partnerships?

Guaranteed payments made by a partnership must be made to individuals other than partners in the partnership.

A partnership must separately report Section 1231 gains and losses rather than including them in ordinary taxable income.

Nash and Ford are partners who share profits and losses equally. For the current tax year, the partnership had book income of $70,000 which included the following deductions: What amount should be reported as ordinary income on the partnership return for the current tax year?

Ownership of a partnership interest by a taxpayer's brother is considered indirect ownership by the taxpayer.

Losses on transactions between a partnership and its partners are always disallowed.

Which of the following statements about partnerships is true?

Jennifer has a 25 percent interest in the Aspen Aircraft partnership. Her basis in her partnership interest is $10,000 at the beginning of the year. The partnership reported the following activity for the year: What is Jennifer's basis in her partnership interest at the end of the year?

The holding period of property contributed to a partnership includes the period of time that the contributor has held the property.

The tax year of a partnership generally closes upon entry of a new 20% partner.

There is no general partner required in a limited liability company (LLC).

In general, income is recognized by the partner when a partnership interest is received in exchange for services rendered to the partnership.

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses Part I

Business Income and Expenses Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding Estimated Payments and Payroll Taxes

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Exam 10: Partnership Taxation

Which one of the following is not true about partnerships?

Guaranteed payments made by a partnership must be made to individuals other than partners in the partnership.

A partnership must separately report Section 1231 gains and losses rather than including them in ordinary taxable income.

Nash and Ford are partners who share profits and losses equally. For the current tax year, the partnership had book income of $70,000 which included the following deductions: What amount should be reported as ordinary income on the partnership return for the current tax year? ​

Ownership of a partnership interest by a taxpayer's brother is considered indirect ownership by the taxpayer.

Losses on transactions between a partnership and its partners are always disallowed.

Which of the following statements about partnerships is true?

Jennifer has a 25 percent interest in the Aspen Aircraft partnership. Her basis in her partnership interest is $10,000 at the beginning of the year. The partnership reported the following activity for the year: What is Jennifer's basis in her partnership interest at the end of the year?

The holding period of property contributed to a partnership includes the period of time that the contributor has held the property.

The tax year of a partnership generally closes upon entry of a new 20% partner.

There is no general partner required in a limited liability company (LLC).

In general, income is recognized by the partner when a partnership interest is received in exchange for services rendered to the partnership.

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses Part I

Business Income and Expenses Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding Estimated Payments and Payroll Taxes

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Nash and Ford are partners who share profits and losses equally. For the current tax year, the partnership had book income of $70,000 which included the following deductions: What amount should be reported as ordinary income on the partnership return for the current tax year?