Exam 10: Partnership Taxation

Jim's basis in his partnership is $200,000. His share of the current year partnership income is $60,000. The partnership paid him a $75,000 distribution in the current year. What is his new basis in the partnership at the end of the year and what is his taxable income from the partnership?

The "at-risk" rule applies, with limited exceptions, to all taxable activities.

A partnership may not show a loss as a result of deducting guaranteed payments made to the partners.

A partner contributes assets with a basis of $50,000 and a fair market value of $80,000 to a partnership. What is the basis of the property to the partnership and what is the general rule for the basis of appreciated property contributed to a partnership?

Please answer the following questions: a.What form is used to report income and expenses from a partnership? b.If a partner's basis at the beginning of the year is $1,000 and the partnership allocates $7,000 of loss to the partner: how much of the loss is deductible in the current year; what is his new basis in the partnership; and what happens to any excess loss not deducted? c.What is the exemption amount for a partnership?

For the following separate, independent situations indicate with a "Yes" if a partnership return needs to be filed. Mark with a "No" if a partnership return is not required. a.Tony and Gina form a joint venture to import goods from South Korea. b.Nancy decided to start her own private investigative business. c.Uncle Pennybag's estate assets are pooled together until they can be distributed to the beneficiaries. d.Howie, Dewey, and Cheatem form an LLC. e.Flora, Fauna, and Merryweather start a child care business.No official documents are drawn up.

A partnership will terminate and its tax year will close if the partnership ceases to carry on any business activity.

The partnership of Felix and Oscar had the following items of income during the current tax year: What is the total ordinary income from business activities passed through by the partnership for the current tax year?

Owen owns 60 percent of the Big Time partnership. He sells to the partnership a machine for $70,000 that has a $45,000 basis. What would the taxable income be for Owen and what is the partnership's basis in the machine?

List three advantages of an LLC.

Which of the following is true about an LLC (Limited Liability Company)?

Limited liability companies may operate in more than one state.

If a partner has a more than 50 percent interest in a partnership, a capital gain resulting from the sale of property to the partnership will be taxed as ordinary income to the partner, provided the property is not a capital asset to the partnership.

Kitty is a 60 percent partner of Tabby Associates. Kitty sells a building to the partnership for $75,000. If the building had an adjusted basis to Kitty of $95,000, how much gain or loss does Kitty recognize on this transaction?

Which of the following statements is true about partnerships?

Lilac Designs is a partnership with a tax year that ends November 30, 2016. During that year, William, a partner, received $4,000 per month as a guaranteed payment and his share of partnership income after guaranteed payments was $20,000. For December of 2016, William received a guaranteed payment of $10,000. Calculate the amount of income from the partnership that William should report for his tax year ended December 31, 2016.

Partnership income is taxed at the same tax rates as the income of corporations.

A partnership may deduct a single personal exemption in calculating ordinary taxable income or loss.

Assuming that a partnership normally has a calendar year-end, what should the tax year-end be in the following independent cases? ​ a.Jim, a 70 percent partner, sells his partnership interest to Fred on August 10. b.On July 13, the partnership sells its office building and moves its business across town. c.June buys a 15 percent interest in the partnership on May 14. d.The partnership goes out of business on February 26.

Wallace and Pedersen have equal interests in the capital and profits of the partnership of Wallace and Pedersen, but are otherwise unrelated. On August 1, 2016, Wallace sold 100 shares of Kalmia Mining Corporation to the partnership for its fair market value of $7,000. Wallace had bought the stock in 2007 at a cost of $10,000. What is Wallace's deductible loss for 2016 as a result of the sale of this stock?