Exam 10: Partnership Taxation

During 2014, Jay is a partner in an automobile dealership. Jay's amount at risk at the beginning of the year is $90,000, and during 2014 Jay's share of the dealership's ordinary loss is $120,000. a.What is the amount of the loss from the automobile dealership that Jay may deduct in 2014? b.If the dealership has a profit of $63,000 in 2015, how much of the 2015 income is taxable to Jay?

Which of the following statement is true about partnerships?

A partner's interest in a partnership is decreased by:

On July 1, 2014, Ambrose was admitted to partnership in the firm of Ambrose and Nectar. His contribution to capital consisted of 500 shares of stock in Paniculata Corporation, which he bought in 1990 for $10,000 and which had a fair market value of $50,000 on July 1, 2014. Ambrose's interest in the partnership's capital and profits is 25 percent. On July 1, 2014, the fair market value of the partnership's net assets (after Ambrose was admitted) was $200,000. What is Ambrose's taxable gain in 2014 on the exchange of stock for his partnership interest?

A partnership reports its income on Form 1040.

Jamie decides to contribute cash and property to a partnership she and her friends started. She contributes a building worth $260,000 that she purchased for $100,000 and she also contributes $40,000 in cash. What is her basis in the partnership?

A distribution of cash to a partner was greater than his basis in the partnership. How would this distribution be treated by the partner, assuming the distribution is not a liquidating distribution?

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

Which of the following items must be reported separately from ordinary income or loss on a partnership return?

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

In December of 2014, Miss Havisham and Pip form a wedding planning business. Each of them own 50 percent of the partnership. The partnership establishes a September 30th year-end since most weddings are during the summer. Therefore, the partnership year-end is September 30, 2015. For the month of December 2014, the partnership made $3,000 after Miss Havisham's guaranteed payment of $1,000. From January through September of 2015, the partnership made a net income of $65,000 after a $1,500 per month guaranteed payment to Miss Havisham. ​ a. How much income should Miss Havisham report for 2014? b. How much income should Miss Havisham report for 2015?

The partnership of Truman and Hanover realized the following items of income during the year ended December 31, 2014: Both the partners are on a calendar year basis. What is the total income which should be reported as ordinary income from business activities of the partnership for 2014?

Partnership losses that are not used because a partner's basis in the partnership interest is zero may not be carried forward and are lost by the partner.

Nash and Ford are partners who share profits and losses equally. For the year ended December 31, 2014, the partnership had book income of $80,000 which included the following deductions: What amount should be reported as ordinary income on the partnership return for 2014?

A partnership must separately report Section 1231 gains and losses rather than including them in ordinary taxable income.

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

In general, income is recognized by the partner when a partnership interest is received in exchange for services rendered to the partnership.

Guaranteed payments made by a partnership must be made to individuals other than partners in the partnership.

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?

Ownership of a partnership interest by a taxpayer's brother is considered indirect ownership by the taxpayer.