Question 1

​Which one of the following is not an item that should be documented in the partnership (or LLC operating) agreement?

Accepted Answer

A) ​Allocations of cash flows. 
B) ​Allocations of profits and losses. 
C) ​Liquidating distributions. 
D) ​Partners' rights in managing the partnership. 
E) ​All of the above should be documented. 
A) ​Allocations of cash flows. 
B) ​Allocations of profits and losses. 
C) ​Liquidating distributions. 
D) ​Partners' rights in managing the partnership. 
E) ​All of the above should be documented.

Question 2

Match each of the following statements with the terms below that provide the best definition.
a.Organizational choice of many large accounting firms.
b.Partner's percentage allocation of current operating income.
c.Might affect any two partners' tax liabilities in different ways.
d.Brokerage and registration fees incurred for promoting and marketing partnership interests.
e.Transfer of asset to partnership followed by immediate distribution of cash to partner.
f.Must have at least one general and one limited partner.
g.All partners are jointly and severally liable for entity debts.
h.Theory treating the partner and partnership as separate economic units.
i.Partner's basis in partnership interest after tax-free contribution of asset to partnership.
j.Partnership's basis in asset after tax-free contribution of asset to partnership.
k.Owners are "members."
l.Theory treating the partnership as a collection of taxpayers joined in an agency relationship.
m.Allows many unincorporated entities to select their Federal tax status.
n.No correct match provided.
-Aggregate concept

Accepted Answer

The answer of Match each of the following statements with...

Question 3

Partners' capital accounts should be determined using the same method on Form 1065 Schedule L,Form 1065 Schedule M-2,and the Schedules K-1 prepared for the partners.

Accepted Answer

A) True 
 B)False

Question 4

Match each of the following statements with the terms below that provide the best definition.
Match each of the following statements with the terms below that provide the best definition.
a. Adjusted basis of each partnership asset.
b. Operating expenses incurred after entity is formed but before it begins doing business.
c. Each partner's basis in the partnership.
d. Reconciles book income to "taxable income."
e. Tax accounting election made by partnership.
f. Tax accounting calculation made by partner.
g. Tax accounting election made by partner.
h. Does not include liabilities.
i. Designed to prevent excessive deferral of taxation of partnership income.
j. Amount that may be received by partner for performance of services for the partnership.
k. Theory under which a partnership's recourse debt is shared among the partners.
l. Will eventually be allocated to partner making tax-free property contribution to partnership.
m. Partner's share of partnership items.
n. Must generally be satisfied by any allocation to the partners.
o. Justification for a tax year other than the required taxable year.
p. No correct match is provided.
-Schedules M-1

Accepted Answer

The answer of Match each of the following statements with...

Question 5

Mark and Addison formed a partnership.Mark received a 25% interest in partnership capital and profits in exchange for land with a basis of $40,000 and a fair market value of $60,000.Addison received a 75% interest in partnership capital and profits in exchange for $180,000 of cash.Three years after the contribution date,the land contributed by Mark is sold by the partnership to a third party for $76,000.How much taxable gain will Mark recognize from the sale?

Accepted Answer

A) $0 
B) $9,000 
C) $24,000 
D) $36,000 
A) $0 
B) $9,000 
C) $24,000 
D) $36,000

Question 6

TEC Partners was formed during the current tax year.It incurred $10,000 of organizational expenses,$80,000 of startup expenses,and $5,000 of transfer taxes to retitle property contributed by a partner.The property had been held as MACRS property for ten years by the contributing partner,and had an adjusted basis to the partner of $300,000 and fair market value of $400,000.Which of the following statements is correct regarding these items?

Accepted Answer

A) TEC treats the contributed property as a new MACRS asset placed in service on the date the property title is transferred. 
B) TEC must amortize the $10,000 of organizational expenses over 180 months. 
C) TEC's deducts the first $5,000 of startup expenses and amortizes the remainder over 180 months. 
D) TEC must capitalize the transfer tax and treat it as a new asset placed in service on the date the property is contributed. 
E) None of the above statements are true. 
A) TEC treats the contributed property as a new MACRS asset placed in service on the date the property title is transferred. 
B) TEC must amortize the $10,000 of organizational expenses over 180 months. 
C) TEC's deducts the first $5,000 of startup expenses and amortizes the remainder over 180 months. 
D) TEC must capitalize the transfer tax and treat it as a new asset placed in service on the date the property is contributed. 
E) None of the above statements are true.

Question 7

​The partner (rather than the partnership) will make which one of the following elections?

Accepted Answer

A) ​Election to claim straight line depreciation. 
B) ​Election to claim a credit or deduction for foreign taxes paid. 
C) ​Election to claim a low-income housing credit. 
D) Election to claim a §179 deduction for certain property placed in service during the year. 
E) ​The partner makes any of the above elections. 
A) ​Election to claim straight line depreciation. 
B) ​Election to claim a credit or deduction for foreign taxes paid. 
C) ​Election to claim a low-income housing credit. 
D) Election to claim a §179 deduction for certain property placed in service during the year. 
E) ​The partner makes any of the above elections.

Question 8

​SQRLY LLC has about 25 LLC members.SwanCo (30% owner) and QuinnCo (16% owner) both have June 30 tax year ends.Royce,Inc.; Larry,Inc.; and Yolanda,Inc.each own 4% (12% total) and have September 31 taxable year ends.The other LLC members (42% total) each own interests of 4% or less and use the calendar year (December 31).Which one of the following statements is true regarding the LLC's taxable year end?

Accepted Answer

A) ​The taxable year is determined under the least aggregate deferral rule and is December 31. 
B) ​The taxable year is determined under the least aggregate deferral rule and is June 30. 
C) ​The taxable year is determined under the majority interest rule and is December 31. 
D) ​The taxable year is determined under the principal partner rule and is June 30. 
E) ​The taxable year is determined under the least aggregate deferral rule and is September 30. 
A) ​The taxable year is determined under the least aggregate deferral rule and is December 31. 
B) ​The taxable year is determined under the least aggregate deferral rule and is June 30. 
C) ​The taxable year is determined under the majority interest rule and is December 31. 
D) ​The taxable year is determined under the principal partner rule and is June 30. 
E) ​The taxable year is determined under the least aggregate deferral rule and is September 30.

Question 9

Match each of the following statements with the terms below that provide the best definition.
Match each of the following statements with the terms below that provide the best definition.
a. Adjusted basis of each partnership asset.
b. Operating expenses incurred after entity is formed but before it begins doing business.
c. Each partner's basis in the partnership.
d. Reconciles book income to "taxable income."
e. Tax accounting election made by partnership.
f. Tax accounting calculation made by partner.
g. Tax accounting election made by partner.
h. Does not include liabilities.
i. Designed to prevent excessive deferral of taxation of partnership income.
j. Amount that may be received by partner for performance of services for the partnership.
k. Theory under which a partnership's recourse debt is shared among the partners.
l. Will eventually be allocated to partner making tax-free property contribution to partnership.
m. Partner's share of partnership items.
n. Must generally be satisfied by any allocation to the partners.
o. Justification for a tax year other than the required taxable year.
p. No correct match is provided.
-Precontribution gain

Accepted Answer

The answer of Match each of the following statements with...

Question 10

Match each of the following statements with the terms below that provide the best definition.
a.Organizational choice of many large accounting firms.
b.Partner's percentage allocation of current operating income.
c.Might affect any two partners' tax liabilities in different ways.
d.Brokerage and registration fees incurred for promoting and marketing partnership interests.
e.Transfer of asset to partnership followed by immediate distribution of cash to partner.
f.Must have at least one general and one limited partner.
g.All partners are jointly and severally liable for entity debts.
h.Theory treating the partner and partnership as separate economic units.
i.Partner's basis in partnership interest after tax-free contribution of asset to partnership.
j.Partnership's basis in asset after tax-free contribution of asset to partnership.
k.Owners are "members."
l.Theory treating the partnership as a collection of taxpayers joined in an agency relationship.
m.Allows many unincorporated entities to select their Federal tax status.
n.No correct match provided.
-Startup costs

Accepted Answer

The answer of Match each of the following statements with...

Question 11

The JPM Partnership is a US-based manufacturing company.JPM calculates the domestic production activities deduction (§ 199) and deducts that amount on its Form 1065.

Accepted Answer

A) True 
 B)False

Question 12

Match each of the following statements with the terms below that provide the best definition.
a.Organizational choice of many large accounting firms.
b.Partner's percentage allocation of current operating income.
c.Might affect any two partners' tax liabilities in different ways.
d.Brokerage and registration fees incurred for promoting and marketing partnership interests.
e.Transfer of asset to partnership followed by immediate distribution of cash to partner.
f.Must have at least one general and one limited partner.
g.All partners are jointly and severally liable for entity debts.
h.Theory treating the partner and partnership as separate economic units.
i.Partner's basis in partnership interest after tax-free contribution of asset to partnership.
j.Partnership's basis in asset after tax-free contribution of asset to partnership.
k.Owners are "members."
l.Theory treating the partnership as a collection of taxpayers joined in an agency relationship.
m.Allows many unincorporated entities to select their Federal tax status.
n.No correct match provided.
-Check the box regulations

Accepted Answer

The answer of Match each of the following statements with...

Question 13

The partnership agreement might provide,for example,that all interest income is allocated to Partner A.
Allocating income in this manner is an example of a separately stated item.
​
​

Accepted Answer

A) True 
 B)False

Question 14

Before allocations for the current year,Marvin's basis in the MR LLC,in which Marvin is not an active member,is $50,000.His basis includes $10,000 of debt that he guaranteed,and $20,000 of nonrecourse debt that is not qualified nonrecourse financing.Marvin has passive income from other sources of $40,000.The LLC allocates a loss of $60,000 to Marvin.After application of the loss limitation rules,Marvin can deduct $40,000.

Accepted Answer

A) True 
 B)False

Question 15

Match each of the following statements with the terms below that provide the best definition.
a.Organizational choice of many large accounting firms.
b.Partner's percentage allocation of current operating income.
c.Might affect any two partners' tax liabilities in different ways.
d.Brokerage and registration fees incurred for promoting and marketing partnership interests.
e.Transfer of asset to partnership followed by immediate distribution of cash to partner.
f.Must have at least one general and one limited partner.
g.All partners are jointly and severally liable for entity debts.
h.Theory treating the partner and partnership as separate economic units.
i.Partner's basis in partnership interest after tax-free contribution of asset to partnership.
j.Partnership's basis in asset after tax-free contribution of asset to partnership.
k.Owners are "members."
l.Theory treating the partnership as a collection of taxpayers joined in an agency relationship.
m.Allows many unincorporated entities to select their Federal tax status.
n.No correct match provided.
-Limited partnership

Accepted Answer

The answer of Match each of the following statements with...

Question 16

Which of the following is not a specific adjustment to the partners' basis in the partnership interest?

Accepted Answer

A) Increased by contributions the partner made to the partnership. 
B) Decreased by the amount of guaranteed payments shown on the partner's Schedule K-1. 
C) Increased by the partner's share of tax-exempt income. 
D) Decreased by any decrease in the partner's share of partnership liabilities. 
E) Increased by the partner's share of separately stated income items. 
A) Increased by contributions the partner made to the partnership. 
B) Decreased by the amount of guaranteed payments shown on the partner's Schedule K-1. 
C) Increased by the partner's share of tax-exempt income. 
D) Decreased by any decrease in the partner's share of partnership liabilities. 
E) Increased by the partner's share of separately stated income items.

Question 17

Match each of the following statements with the terms below that provide the best definition.
Match each of the following statements with the terms below that provide the best definition.
a. Adjusted basis of each partnership asset.
b. Operating expenses incurred after entity is formed but before it begins doing business.
c. Each partner's basis in the partnership.
d. Reconciles book income to "taxable income."
e. Tax accounting election made by partnership.
f. Tax accounting calculation made by partner.
g. Tax accounting election made by partner.
h. Does not include liabilities.
i. Designed to prevent excessive deferral of taxation of partnership income.
j. Amount that may be received by partner for performance of services for the partnership.
k. Theory under which a partnership's recourse debt is shared among the partners.
l. Will eventually be allocated to partner making tax-free property contribution to partnership.
m. Partner's share of partnership items.
n. Must generally be satisfied by any allocation to the partners.
o. Justification for a tax year other than the required taxable year.
p. No correct match is provided.
-Economic effect test

Accepted Answer

The answer of Match each of the following statements with...

Question 18

Tim,Al,and Pat contributed assets to form the equal TAP Partnership.Tim contributed cash of $40,000 and land with a basis of $80,000 (fair market value of $60,000).Al contributed cash of $60,000 and land with a basis of $50,000 (fair market value of $40,000).Pat contributed cash of $60,000 and a fully depreciated property ($0 basis) valued at $40,000.Which of the following tax treatments is not correct?

Accepted Answer

A) Tim's basis in his partnership interest is $120,000. 
B) Al realizes and recognizes a loss of $10,000. 
C) Pat realizes a gain of $40,000 but recognizes $0 gain. 
D) TAP has a basis of $80,000, $50,000, and $0 in the land and property (excluding cash) contributed by Tim, Al, and Pat, respectively. 
E) All of these statements are correct. 
A) Tim's basis in his partnership interest is $120,000. 
B) Al realizes and recognizes a loss of $10,000. 
C) Pat realizes a gain of $40,000 but recognizes $0 gain. 
D) TAP has a basis of $80,000, $50,000, and $0 in the land and property (excluding cash) contributed by Tim, Al, and Pat, respectively. 
E) All of these statements are correct.

Question 19

A partnership is an association formed by two or more taxpayers (which may be any type of entity) to carry on a trade or business.

Accepted Answer

A) True 
 B)False

Question 20

Which one of the following statements regarding partnership taxation is incorrect?

Accepted Answer

A) A partnership is a tax paying entity for Federal income tax purposes. 
B) Partnership income is comprised of ordinary partnership income or loss and separately stated items. 
C) A partnership is required to file a return with the IRS. 
D) A partner's profit-sharing percent may differ from the partner's loss-sharing percent. 
E) All of these statements are correct. 
A) A partnership is a tax paying entity for Federal income tax purposes. 
B) Partnership income is comprised of ordinary partnership income or loss and separately stated items. 
C) A partnership is required to file a return with the IRS. 
D) A partner's profit-sharing percent may differ from the partner's loss-sharing percent. 
E) All of these statements are correct.

Which one of the following is not an item that should be documented in the partnership (or LLC operating) agreement?

Partners' capital accounts should be determined using the same method on Form 1065 Schedule L,Form 1065 Schedule M-2,and the Schedules K-1 prepared for the partners.

The partner (rather than the partnership) will make which one of the following elections?

The JPM Partnership is a US-based manufacturing company.JPM calculates the domestic production activities deduction (§ 199) and deducts that amount on its Form 1065.

The partnership agreement might provide,for example,that all interest income is allocated to Partner A. Allocating income in this manner is an example of a separately stated item.

Which of the following is not a specific adjustment to the partners' basis in the partnership interest?

A partnership is an association formed by two or more taxpayers (which may be any type of entity) to carry on a trade or business.

Which one of the following statements regarding partnership taxation is incorrect?

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, cost Recovery, amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxable Exchanges

Property Transactions, capital Gains and Losses, sec1231, and Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganization

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters

Exam 21: Partnerships

​Which one of the following is not an item that should be documented in the partnership (or LLC operating) agreement?

Partners' capital accounts should be determined using the same method on Form 1065 Schedule L,Form 1065 Schedule M-2,and the Schedules K-1 prepared for the partners.

​The partner (rather than the partnership) will make which one of the following elections?

The JPM Partnership is a US-based manufacturing company.JPM calculates the domestic production activities deduction (§ 199) and deducts that amount on its Form 1065.

The partnership agreement might provide,for example,that all interest income is allocated to Partner A. Allocating income in this manner is an example of a separately stated item. ​ ​

Which of the following is not a specific adjustment to the partners' basis in the partnership interest?

A partnership is an association formed by two or more taxpayers (which may be any type of entity) to carry on a trade or business.

Which one of the following statements regarding partnership taxation is incorrect?

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, cost Recovery, amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxable Exchanges

Property Transactions, capital Gains and Losses, sec1231, and Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganization

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters

Which one of the following is not an item that should be documented in the partnership (or LLC operating) agreement?

The partner (rather than the partnership) will make which one of the following elections?

The partnership agreement might provide,for example,that all interest income is allocated to Partner A. Allocating income in this manner is an example of a separately stated item.