Question 1

Under which of the following circumstances will a partner recognize a gain from an operating distribution?

Accepted Answer

A) A partner will never recognize a gain from an operating distribution. 
B) A partner will recognize a gain from an operating distribution when the partnership distributes property other than money with an inside basis greater than the partner's basis in the partnership interest. 
C) A partner will recognize a gain from an operating distribution when the partnership distributes money in an amount that is less than the partner's basis in the partnership interest. 
D) A partner will recognize a gain from an operating distribution when the partnership distributes money in an amount that is greater than the partner's basis in the partnership interest. 
A) A partner will never recognize a gain from an operating distribution. 
B) A partner will recognize a gain from an operating distribution when the partnership distributes property other than money with an inside basis greater than the partner's basis in the partnership interest. 
C) A partner will recognize a gain from an operating distribution when the partnership distributes money in an amount that is less than the partner's basis in the partnership interest. 
D) A partner will recognize a gain from an operating distribution when the partnership distributes money in an amount that is greater than the partner's basis in the partnership interest.

Question 2

A partner's debt relief from the sale of a partnership interest will decrease his outside basis.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements regarding the sale of a partnership interest is false?

Accepted Answer

A) The seller's primary tax concern in a partnership interest sale is calculating the amount and character of gain or loss on the sale. 
B) The selling partner determines the gain or loss as the difference between the amount realized and her outside basis in the partnership. 
C) Hot assets change the character of a gain on the sale from ordinary income to capital gain. 
D) Any debt relief increases the amount the partner realizes from the salE.Hot assets change the character of a gain on the sale from capital gain to ordinary income. 
A) The seller's primary tax concern in a partnership interest sale is calculating the amount and character of gain or loss on the sale. 
B) The selling partner determines the gain or loss as the difference between the amount realized and her outside basis in the partnership. 
C) Hot assets change the character of a gain on the sale from ordinary income to capital gain. 
D) Any debt relief increases the amount the partner realizes from the salE.Hot assets change the character of a gain on the sale from capital gain to ordinary income.

Question 4

Jenny has a $54,000 basis in her 50% partnership interest in the JM Partnership before receiving any distributions. This year JM makes a proportionate current distribution to Jenny of a parcel of land with an $80,000 fair value and a $64,000 basis to JM. The land is encumbered with a $30,000 mortgage (JM's only liability). What is Jenny's basis in the land and her remaining basis in JM after the distribution?

Accepted Answer

A) $80,000 land basis, $0 JM basis 
B) $64,000 land basis, $0 JM basis 
C) $64,000 land basis, $5,000 JM basis 
D) $80,000 land basis, $5,000 JM basis 
A) $80,000 land basis, $0 JM basis 
B) $64,000 land basis, $0 JM basis 
C) $64,000 land basis, $5,000 JM basis 
D) $80,000 land basis, $5,000 JM basis

Question 5

Kathy purchases a one-third interest in the KDP Partnership from Paul for $60,000. Just prior to the sale, Paul's outside and inside bases in KDP are $48,000. KDP's balance sheet includes the following:  
 
If KDP has a §754 election in place, what is Kathy's special basis adjustment?

Accepted Answer

A) $0 
B) $36,000 
C) $12,000 
D) None of these is correct. 
A) $0 
B) $36,000 
C) $12,000 
D) None of these is correct.

Question 6

Kathy is a 25% partner in the KDP Partnership and receives a parcel of land with a fair value of $150,000 (inside basis of $100,000) in complete liquidation of her partnership interest. Kathy's outside basis immediately before the distribution is $200,000. KDP currently has a §754 election in effect and has no hot assets or liabilities. What is KDP's special basis adjustment from the distribution?

Accepted Answer

A) $0 
B) $50,000 step up 
C) $100,000 step up 
D) $100,000 step down 
A) $0 
B) $50,000 step up 
C) $100,000 step up 
D) $100,000 step down

Question 7

The SSC Partnership balance sheet includes the following assets on December 31 of the current year:  
Which of SSC's assets are considered hot assets under §751(a)?

Accepted Answer

A) Cash and accounts receivable. 
B) Cash and land. 
C) Accounts receivable and land. 
D) Accounts receivable and inherent recapture under §1245 in the equipment. 
A) Cash and accounts receivable. 
B) Cash and land. 
C) Accounts receivable and land. 
D) Accounts receivable and inherent recapture under §1245 in the equipment.

Question 8

The PW partnership's balance sheet includes the following assets immediately before it liquidates:  
In complete liquidation PW distributes the cash to Pamela and the unrealized receivables to Wade (equal partners). Pamela and Wade each have an outside basis in PW equal to $5,000. PW has no liabilities at the time of the liquidation. What is the amount and character of Pamela's recognized gain or loss?

Accepted Answer

A) $0 
B) $5,000 capital gain 
C) $5,000 ordinary income 
D) $2,500 capital gain and $2,500 ordinary income 
A) $0 
B) $5,000 capital gain 
C) $5,000 ordinary income 
D) $2,500 capital gain and $2,500 ordinary income

Question 9

Locke is a 50% partner in the LS Partnership. Locke has a basis in his partnership interest of $84,000 at the end of the current year, prior to any distribution. On December 31, Locke receives an operating distribution of $30,000 cash. LS has no debt or hot assets. What is the amount and character of Locke's recognized gain or loss? What is Locke's ending basis in his partnership interest?

Accepted Answer

Locke recognizes no gain or lo

Question 10

A partner that receives cash in an operating distribution recognizes loss if the cash distributed is less than the partner's outside basis in the partnership immediately before the distribution.

Accepted Answer

A) True 
 B)False

Question 11

The partnership making an operating distribution will recognize gain or loss only when the partner that receives the distribution recognizes gain or loss.

Accepted Answer

A) True 
 B)False

Question 12

The SSC Partnership balance sheet includes the following assets on December 31 of the current year:  
Susan, a 1/3 partner, has an adjusted basis of $90,000 for her partnership interest. If Susan sells her entire partnership interest to Emma for $120,000 cash, how much capital gain and ordinary income must Susan recognize from the sale?

Accepted Answer

A) $30,000 ordinary income 
B) $30,000 capital gain 
C) $10,000 ordinary income; $20,000 capital gain 
D) $10,000 capital gain; $20,000 ordinary income 
A) $30,000 ordinary income 
B) $30,000 capital gain 
C) $10,000 ordinary income; $20,000 capital gain 
D) $10,000 capital gain; $20,000 ordinary income

Question 13

Scott is a 50% partner in the LS Partnership. Scott has a basis in his partnership interest of $84,000 at the end of the current year, prior to any distribution. On December 31, Scott receives an operating distribution of $9,000 cash and a parcel of land with a $21,000 fair market value and a $12,000 basis to the partnership. LS has no debt or hot assets. What is the amount and character of Scott's recognized gain or loss? What is Scott's basis in the distributed property? What is Scott's ending basis in his partnership interest?

Accepted Answer

Scott recognizes no gain or loss. He tak

Question 14

The PW partnership's balance sheet includes the following assets immediately before it liquidates:  
In complete liquidation PW distributes the cash to Pamela and the unrealized receivables to Wade (equal partners). Pamela and Wade each have an outside basis in PW equal to $5,000. PW has no liabilities at the time of the liquidation. What is the amount and character of Wade's recognized gain or loss?

Accepted Answer

A) $0 
B) $5,000 capital gain 
C) $5,000 ordinary income 
D) $2,500 capital gain and $2,500 ordinary income 
A) $0 
B) $5,000 capital gain 
C) $5,000 ordinary income 
D) $2,500 capital gain and $2,500 ordinary income

Question 15

Randolph is a 30% partner in the RD Partnership. On January 1, RD distributes $15,000 cash, inventory with a fair value of $20,000 (inside basis of $10,000), and a parcel of land with a fair value of $10,000 (inside basis of $5,000) to Randolph in complete liquidation of his interest. RD has no liabilities at the date of the distribution. Randolph's basis in RD is $37,000. What is Randolph's basis in the distributed inventory and land?

Accepted Answer

A) $10,000 inventory, $10,000 land 
B) $10,000 inventory, $5,000 land 
C) $20,000 inventory, $10,000 land 
D) $10,000 inventory, $12,000 land 
A) $10,000 inventory, $10,000 land 
B) $10,000 inventory, $5,000 land 
C) $20,000 inventory, $10,000 land 
D) $10,000 inventory, $12,000 land

Question 16

Which of the following assets would not be classified as hot assets?

Accepted Answer

A) Inventory. 
B) Depreciation recapture. 
C) Cash. 
D) Accounts receivable for a cash method taxpayer. 
A) Inventory. 
B) Depreciation recapture. 
C) Cash. 
D) Accounts receivable for a cash method taxpayer.

Question 17

Jackson is a 30% partner in the JJM Partnership when he sells his entire interest to Rhonda for $112,000 cash. At the time of the sale, Jackson's basis in JJM is $64,000. JJM does not have any debt or hot assets. What is Jackson's gain or loss on the sale of his interest?

Accepted Answer

A) $48,000 capital gain. 
B) $48,000 ordinary income. 
C) $24,000 capital gain and $24,000 ordinary income. 
D) Gain or loss cannot be determineD.Jackson recognizes a gain determined as the difference between the amount realized on the sale and his basis in the partnership interest.Because JJM has no hot assets, the gain will be characterized as capital. 
A) $48,000 capital gain. 
B) $48,000 ordinary income. 
C) $24,000 capital gain and $24,000 ordinary income. 
D) Gain or loss cannot be determineD.Jackson recognizes a gain determined as the difference between the amount realized on the sale and his basis in the partnership interest.Because JJM has no hot assets, the gain will be characterized as capital.

Question 18

Daniela is a 25% partner in the JRD Partnership. On January 1, JRD makes a liquidating distribution of $16,000 cash, inventory with a $16,000 fair value (inside basis $8,000), and accounts receivable with a fair value of $8,000 (inside basis of $12,000) to Daniela. JRD has no liabilities at the date of the distribution. Daniela's basis in JRD is $20,000. What is the amount and character of Daniela's gain or loss from the distribution?

Accepted Answer

A) $0 
B) $16,000 ordinary income 
C) $16,000 capital gain 
D) $20,000 capital gain 
A) $0 
B) $16,000 ordinary income 
C) $16,000 capital gain 
D) $20,000 capital gain

Question 19

Tyson is a 25% partner in the KT Partnership. On January 1, KT distributes $16,000 cash, inventory with a $10,000 fair value (inside basis $4,000), land A with a fair value of $8,000 (inside basis of $12,000) and land B with a fair value of $6,000 (inside basis of $4,000) to Tyson. KT has no liabilities at the date of the distribution. Tyson's basis in KT is $23,000. What is Tyson's basis in the distributed inventory, land A and land B?

Accepted Answer

A) $10,000 inventory, $8,000 land A, $6,000 land B 
B) $4,000 inventory, $12,000 land A, $4,000 land B 
C) $0 inventory, $2,857 land A, $143 land B 
D) $4,000 inventory, $2,000 land A, $1,000 land B 
A) $10,000 inventory, $8,000 land A, $6,000 land B 
B) $4,000 inventory, $12,000 land A, $4,000 land B 
C) $0 inventory, $2,857 land A, $143 land B 
D) $4,000 inventory, $2,000 land A, $1,000 land B

Question 20

A partner recognizes gain when he receives cash in excess of his outside basis in a liquidating distribution.

Accepted Answer

A) True 
 B)False

Under which of the following circumstances will a partner recognize a gain from an operating distribution?

A partner's debt relief from the sale of a partnership interest will decrease his outside basis.

Which of the following statements regarding the sale of a partnership interest is false?

Kathy purchases a one-third interest in the KDP Partnership from Paul for $60,000. Just prior to the sale, Paul's outside and inside bases in KDP are $48,000. KDP's balance sheet includes the following: If KDP has a §754 election in place, what is Kathy's special basis adjustment?

The SSC Partnership balance sheet includes the following assets on December 31 of the current year: Which of SSC's assets are considered hot assets under §751(a)?

A partner that receives cash in an operating distribution recognizes loss if the cash distributed is less than the partner's outside basis in the partnership immediately before the distribution.

The partnership making an operating distribution will recognize gain or loss only when the partner that receives the distribution recognizes gain or loss.

Which of the following assets would not be classified as hot assets?

Jackson is a 30% partner in the JJM Partnership when he sells his entire interest to Rhonda for $112,000 cash. At the time of the sale, Jackson's basis in JJM is $64,000. JJM does not have any debt or hot assets. What is Jackson's gain or loss on the sale of his interest?

A partner recognizes gain when he receives cash in excess of his outside basis in a liquidating distribution.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters

Exam 21: Dispositions of Partnership Interests and Partnership Distributions

Under which of the following circumstances will a partner recognize a gain from an operating distribution?

A partner's debt relief from the sale of a partnership interest will decrease his outside basis.

Which of the following statements regarding the sale of a partnership interest is false?

Kathy purchases a one-third interest in the KDP Partnership from Paul for $60,000. Just prior to the sale, Paul's outside and inside bases in KDP are $48,000. KDP's balance sheet includes the following: If KDP has a §754 election in place, what is Kathy's special basis adjustment?

The SSC Partnership balance sheet includes the following assets on December 31 of the current year: Which of SSC's assets are considered hot assets under §751(a)?

A partner that receives cash in an operating distribution recognizes loss if the cash distributed is less than the partner's outside basis in the partnership immediately before the distribution.

The partnership making an operating distribution will recognize gain or loss only when the partner that receives the distribution recognizes gain or loss.

Which of the following assets would not be classified as hot assets?

Jackson is a 30% partner in the JJM Partnership when he sells his entire interest to Rhonda for $112,000 cash. At the time of the sale, Jackson's basis in JJM is $64,000. JJM does not have any debt or hot assets. What is Jackson's gain or loss on the sale of his interest?

A partner recognizes gain when he receives cash in excess of his outside basis in a liquidating distribution.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters