Question 1

One of the disadvantages of the partnership form is that the partner's share of the partnership's taxable income is taxed to the partner,regardless of whether or not distributed.

Accepted Answer

A) True 
 B)False

Question 2

Barry owns a 25% interest in a continuing partnership.The partnership distributes a $20,000 year-end cash bonus to all the partners.In a proportionate nonliquidating distribution,the partnership also distributed property (basis of $2,000;fair market value of $3,000)to Barry.Immediately before the distribution,Barry's basis in the partnership interest was $30,000.As a result of the distribution,Barry recognizes:

Accepted Answer

A) No gain or loss. 
B) Ordinary loss of $7,000. 
C) Capital loss of $7,000. 
D) Ordinary loss of $8,000. 
E) Capital loss of $8,000. 
A) No gain or loss. 
B) Ordinary loss of $7,000. 
C) Capital loss of $7,000. 
D) Ordinary loss of $8,000. 
E) Capital loss of $8,000.

Question 3

Marcie is a 40% partner in the MAP Partnership.During the current tax year,the partnership reported ordinary income of $140,000 before payment of guaranteed payments and distributions to partners.The partnership made an ordinary cash distribution of $10,000 to Marcie,and paid guaranteed payments to partners Marcie,Alice,and Pat of $20,000 each ($60,000 total).How much will Marcie's adjusted gross income increase as a result of the above items?

Accepted Answer

A) $32,000 
B) $52,000 
C) $56,000 
D) $76,000 
E) None of the above. 
A) $32,000 
B) $52,000 
C) $56,000 
D) $76,000 
E) None of the above.

Question 4

Joe has a 25% capital and profits interest in the calendar-year GDJ Partnership.His adjusted basis for his partnership interest on October 15 of the current year is $200,000.On that date,the partnership liquidates and makes a proportionate distribution of the following assets to Joe.

Accepted Answer

The answer of Joe has a 25% capital and profits...

Question 5

Cardinal,LLC incurred $20,000 of startup expenses,$3,000 of organizational costs,and paid $10,000 in transfer taxes to change the title (ownership)of a building contributed by one of the LLC's members.Which of the following statements is correct regarding these three amounts?

Accepted Answer

A) Cardinal can deduct $5,000 of the startup expenses. 
B) Cardinal can amortize $15,000 of the startup expenses over 180 months. 
C) Cardinal may deduct the full amount of the organizational costs. 
D) Cardinal can capitalize the $10,000 tax paid as a part of the depreciable basis of the building. 
E) All of the above statements are true. 
A) Cardinal can deduct $5,000 of the startup expenses. 
B) Cardinal can amortize $15,000 of the startup expenses over 180 months. 
C) Cardinal may deduct the full amount of the organizational costs. 
D) Cardinal can capitalize the $10,000 tax paid as a part of the depreciable basis of the building. 
E) All of the above statements are true.

Question 6

Jackie owns a 40% interest in the capital and profits of the JAJ Partnership.Immediately before she receives a proportionate nonliquidating distribution from JAJ,the basis of her partnership interest is $40,000.The distribution consists of $20,000 in cash and land with a fair market value of $30,000.JAJ's adjusted basis in the land immediately before the distribution is $25,000.As a result of the distribution,Jackie recognizes no gain or loss and her basis in the land is $20,000.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements,if any,about an LLC is false?

Accepted Answer

A) An LLC is usually taxed like a partnership. 
B) "Members" of an LLC generally have limited personal liability for debts of the LLC. 
C) "Members" of an LLC can participate in management of the LLC unless the member agrees not to participate. 
D) An LLC can specially allocate income items,as long as the substantial economic effect rules of § 704(b)are followed. 
E) None of the above statements is false. 
A) An LLC is usually taxed like a partnership. 
B) "Members" of an LLC generally have limited personal liability for debts of the LLC. 
C) "Members" of an LLC can participate in management of the LLC unless the member agrees not to participate. 
D) An LLC can specially allocate income items,as long as the substantial economic effect rules of § 704(b)are followed. 
E) None of the above statements is false.

Question 8

Which of the following is a correct definition of a concept related to partnership taxation?

Accepted Answer

A) A partner's capital sharing ratio is defined as the percent of partnership profits that will be allocated to the partner. 
B) The partnership's inside basis is defined as the sum of each partner's capital account balance. 
C) The entity concept treats partners and partnerships as separate units and gives the partnership its own tax "personality." 
D) A special allocation is defined as an amount that could differently affect the tax liabilities of two or more partners. 
E) None of these statements is correct. 
A) A partner's capital sharing ratio is defined as the percent of partnership profits that will be allocated to the partner. 
B) The partnership's inside basis is defined as the sum of each partner's capital account balance. 
C) The entity concept treats partners and partnerships as separate units and gives the partnership its own tax "personality." 
D) A special allocation is defined as an amount that could differently affect the tax liabilities of two or more partners. 
E) None of these statements is correct.

Question 9

A partner has a profit-sharing percent,a loss-sharing percent,and a capital-sharing ownership percent.Depending on the provisions in the partnership agreement,these amounts may or may not be the same for a given partner.

Accepted Answer

A) True 
 B)False

Question 10

The MOG Partnership reports ordinary income of $60,000,long-term capital gain of $12,000,and tax-exempt income of $12,000.The partnership agreement provides that Molly will receive all long-term capital gains and George will receive all tax-exempt interest income.Their allocation of ordinary income will be reduced accordingly,and Olivia will be allocated a proportionately greater share of ordinary income.(In other words,each partner will receive allocations totaling 1/3 of the total $84,000 of partnership income. )This allocation was agreed upon because Molly and George are in a high marginal tax bracket and Olivia is in a low marginal tax bracket.

Accepted Answer

The answer of The MOG Partnership reports ordinary income of...

Question 11

Michael contributes land with a value of $120,000 and a basis of $80,000 to the MNO Partnership in exchange for a 1/4 interest.Several months later,the partnership sells the land for $140,000.Of the gain on the land sale,$45,000 is allocated to Michael.

Accepted Answer

A) True 
 B)False

Question 12

In a proportionate liquidating distribution,Barbara receives a distribution of $40,000 cash,accounts receivable (basis of $0 and fair market value of $20,000),and land (basis of $20,000 and fair market value of $30,000).In addition,the partnership repays all liabilities,of which Barbara's share was $40,000.Barbara's basis in the entity immediately before the distribution was $50,000.As a result of the distribution,what is Barbara's basis in the accounts receivable and land,and how much gain or loss does she recognize?

Accepted Answer

A) $0 basis in accounts receivable;$0 basis in land;$30,000 gain. 
B) $0 basis in accounts receivable;$10,000 basis in land;$0 gain or loss. 
C) $0 basis in accounts receivable;$20,000 basis in land;$0 gain or loss. 
D) $20,000 basis in accounts receivable;$30,000 basis in land;$40,000 gain. 
E) $20,000 basis in accounts receivable;$30,000 basis in land;$80,000 gain. 
A) $0 basis in accounts receivable;$0 basis in land;$30,000 gain. 
B) $0 basis in accounts receivable;$10,000 basis in land;$0 gain or loss. 
C) $0 basis in accounts receivable;$20,000 basis in land;$0 gain or loss. 
D) $20,000 basis in accounts receivable;$30,000 basis in land;$40,000 gain. 
E) $20,000 basis in accounts receivable;$30,000 basis in land;$80,000 gain.

Question 13

Marcie is a 40% member of the M&A LLC.Her basis is $40,000 immediately before the LLC distributes to her $30,000 of cash and land (basis to the LLC of $20,000 and fair market value of $25,000).As a result of the proportionate,nonliquidating distribution,Marcie recognizes a gain of $15,000 and her basis in the land equals its fair market value of $25,000.

Accepted Answer

A) True 
 B)False

Question 14

At the beginning of the tax year,Wick's basis for his partnership interest and his amount at risk in the partnership was $30,000.His share of partnership items for the year consisted of tax-exempt interest income of $2,000 and an ordinary loss of $44,000.He also received a distribution from the partnership of $20,000 cash during the year.For the tax year,Wick will report:

Accepted Answer

A) A nontaxable distribution of $20,000,an ordinary loss of $10,000,and a suspended loss carryforward of $34,000. 
B) An ordinary loss of $32,000,a suspended loss carryforward of $12,000,and a taxable distribution of $20,000. 
C) A nontaxable distribution of $20,000,an ordinary loss of $12,000,and a suspended loss carryforward of $32,000. 
D) An ordinary loss of $44,000 and a nontaxable distribution of $20,000. 
A) A nontaxable distribution of $20,000,an ordinary loss of $10,000,and a suspended loss carryforward of $34,000. 
B) An ordinary loss of $32,000,a suspended loss carryforward of $12,000,and a taxable distribution of $20,000. 
C) A nontaxable distribution of $20,000,an ordinary loss of $12,000,and a suspended loss carryforward of $32,000. 
D) An ordinary loss of $44,000 and a nontaxable distribution of $20,000.

Question 15

Cheryl and Nina formed a partnership.Cheryl received a 40% interest in partnership capital and profits in exchange for land with a basis of $60,000 and a fair market value of $80,000.Nina received a 60% interest in partnership capital and profits in exchange for $120,000 of cash.Three years after the contribution date,the land contributed by Cheryl is sold by the partnership to a third party for $90,000.How much taxable gain will Cheryl recognize from the sale?

Accepted Answer

A) $4,000. 
B) $12,000. 
C) $24,000. 
D) $30,000. 
E) None of the above. 
A) $4,000. 
B) $12,000. 
C) $24,000. 
D) $30,000. 
E) None of the above.

Question 16

Francine receives a proportionate liquidating distribution when the basis of her partnership interest is $20,000.The distribution consists of $25,000 cash and noninventory property (adjusted basis to the partnership of $10,000 and fair market value of $12,000).The partnership has no hot assets.How much gain or loss does Francine recognize,and what is her basis in the distributed property?

Accepted Answer

A) $0 gain or loss;$10,000 basis in property. 
B) $0 gain or loss;$12,000 basis in property. 
C) $5,000 ordinary income;$0 basis in property. 
D) $5,000 capital gain;$0 basis in property. 
E) $5,000 capital gain;$10,000 basis in property. 
A) $0 gain or loss;$10,000 basis in property. 
B) $0 gain or loss;$12,000 basis in property. 
C) $5,000 ordinary income;$0 basis in property. 
D) $5,000 capital gain;$0 basis in property. 
E) $5,000 capital gain;$10,000 basis in property.

Question 17

Pat is a 40% member of the P&J LLC.Her basis is $30,000 immediately before the LLC distributes to her $40,000 of cash and land (basis to the partnership of $25,000 and fair market value of $50,000).As a result of the proportionate nonliquidating distribution,Pat recognizes a gain of $10,000 and her basis in the land is $0.

Accepted Answer

A) True 
 B)False

One of the disadvantages of the partnership form is that the partner's share of the partnership's taxable income is taxed to the partner,regardless of whether or not distributed.

Joe has a 25% capital and profits interest in the calendar-year GDJ Partnership.His adjusted basis for his partnership interest on October 15 of the current year is $200,000.On that date,the partnership liquidates and makes a proportionate distribution of the following assets to Joe.

Cardinal,LLC incurred $20,000 of startup expenses,$3,000 of organizational costs,and paid $10,000 in transfer taxes to change the title (ownership)of a building contributed by one of the LLC's members.Which of the following statements is correct regarding these three amounts?

Which of the following statements,if any,about an LLC is false?

Which of the following is a correct definition of a concept related to partnership taxation?

A partner has a profit-sharing percent,a loss-sharing percent,and a capital-sharing ownership percent.Depending on the provisions in the partnership agreement,these amounts may or may not be the same for a given partner.

Michael contributes land with a value of $120,000 and a basis of $80,000 to the MNO Partnership in exchange for a 1/4 interest.Several months later,the partnership sells the land for $140,000.Of the gain on the land sale,$45,000 is allocated to Michael.

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

Part 1--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges

Part 2--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses,1231,and Recapure Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Distributions in Complete Liquidation and an Overview of Reorganizations

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

One of the disadvantages of the partnership form is that the partner's share of the partnership's taxable income is taxed to the partner,regardless of whether or not distributed.

Joe has a 25% capital and profits interest in the calendar-year GDJ Partnership.His adjusted basis for his partnership interest on October 15 of the current year is $200,000.On that date,the partnership liquidates and makes a proportionate distribution of the following assets to Joe.

Cardinal,LLC incurred $20,000 of startup expenses,$3,000 of organizational costs,and paid $10,000 in transfer taxes to change the title (ownership)of a building contributed by one of the LLC's members.Which of the following statements is correct regarding these three amounts?

Which of the following statements,if any,about an LLC is false?

Which of the following is a correct definition of a concept related to partnership taxation?

A partner has a profit-sharing percent,a loss-sharing percent,and a capital-sharing ownership percent.Depending on the provisions in the partnership agreement,these amounts may or may not be the same for a given partner.

Michael contributes land with a value of $120,000 and a basis of $80,000 to the MNO Partnership in exchange for a 1/4 interest.Several months later,the partnership sells the land for $140,000.Of the gain on the land sale,$45,000 is allocated to Michael.

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

Part 1--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges

Part 2--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses,1231,and Recapure Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Distributions in Complete Liquidation and an Overview of Reorganizations

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