Exam 10: Partnership Taxation

Jerry receives cash of $15,000 and a building with a fair market value of $50,000 (adjusted basis of $30,000) in a current distribution. a.Assuming his basis in his partnership interest was $50,000, what amount of gain must Jerry recognize as a result of the current distribution? b.Assuming his basis in his partnership interest was $10,000, what amount of gain must Jerry recognize as a result of the current distribution?

Income from a partnership is taxed to the partner only if the partner receives the income as a distribution during the year.

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

The "at-risk" rule does not apply to activities involving real estate.

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 is Rita's basis in her partnership interest immediately after formation of the partnership?

Lilac Designs is a partnership with a tax year that ends November 30, 2014. 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 2014, 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, 2014.

Jim's basis in his partnership is $200,000. His share of the 2014 income is $60,000. The partnership gave him a $75,000 distribution in 2014. What is his new basis in the partnership and what is his taxable income?

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

Oscar and Frank form an equal partnership, the O and F Partnership. Oscar contributes land with an adjusted basis of $45,000, subject to a mortgage of $100,000, in exchange for a partnership interest worth $250,000. Frank contributes cash of $100,000 and performs services for the partnership in exchange for a partnership interest worth $250,000. a.What is the amount of Oscar's recognized gain or loss (if any) as a result of the contribution to the partnership in exchange for the partnership interest? b.What is Oscar's basis in his partnership interest immediately after the contribution? c.What is the amount of Frank's recognized income or loss (if any) as a result of the receipt of the partnership interest in exchange for the cash and services? d.What is the partnership's basis in the land received from Oscar?

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 is the partnership's basis in the building contributed by Rita?

Under which of the following circumstances would a partnership terminate and close its tax year?

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.

Phil and Bill each own a 50 percent interest in P&B Interests. P&B Interests has ordinary income for the year of $35,000 before guaranteed payments to Phil. If Phil receives guaranteed payments of $25,000 during the tax year, what is the total income or loss that should be reported by Bill from the partnership for this tax year?

Cypress Road is a partnership with two partners, Saul, a 60 percent partner, and Robbie, a 40 percent partner. The partnership has income for the year of $100,000 before guaranteed payments to Robbie. Guaranteed payments of $50,000 are paid to Robbie for his management services during the year. Calculate the amount of income that should be reported by Saul and Robbie from the partnership for the year. Saul should report income of $__________. Robbie should report income of $__________.

Which of the following statements about partnerships is true?

Which one of the following is not true about partnerships and their income-reporting process?

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?

List three advantages of an LLC.

The partnership of Felix and Oscar had the following items of income during the tax year ended December 31, 2014: What is the total ordinary income from business activities passed through by the partnership for the 2014 tax year?

Lucky's original contribution to the Boxwood Partnership was land with a basis of $5,000 and a market value of $55,000. Her share of the taxable income from the partnership since her original contribution has been $95,000 and Lucky has received $45,000 in cash distributions from the partnership. Lucky did not recognize any gains as a result of the distributions. Calculate Lucky's current basis in her partnership interest.