Exam 10: Partnership Taxation

For the following separate,independent situations indicate with a "Yes" if a partnership return needs to be filed.Mark with a "No" if a partnership return is not required. a.Tony and Gina form a joint venture to import goods from South Korea. b.Nancy decided to start her own private investigative business. c.Uncle Pennybag's estate assets are pooled together until they can be distributed to the beneficiaries. d.Howie,Dewey,and Cheatem form an LLC. e.Flora,Fauna,and Merryweather start a child care business.No official documents are drawn up.

The holding period of property contributed to a partnership includes the period of time that the contributor has held the property.

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

Losses are disallowed for transactions between a partnership and a partner who has a 50 percent interest in the partnership.

Which of the following liabilities would be considered nonrecourse?

Jack and Jill decided to pool their money and start a water delivery business.Since they trust each other so much,they did not draw up any legal documents for the business.During the first year of business,they earned $50,000 which was net of $10,000 paid to Jill as a guaranteed payment.During the second year of business,they decided to limit their liability exposure by forming an LLC. ​ a.Was a partnership formed during the first year? b.If a partnership was formed,how much income will be taxed at the partnership level? c.For the second year,do they need to file a partnership tax return?

Which one of the following is not true about partnerships?

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

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

Debbie and Betty operate the D & B partnership.Betty,a 50 percent partner,receives a guaranteed payment of $10,000 for her services in operating the partnership.The partnership has income before the guaranteed payment of $5,000.What is the taxable income Debbie and Betty must each report from the partnership for the year? Debbie should report income of $__________. Betty should report income of $__________.

The basis of a partner's interest in a partnership is increased by losses of the partnership allocated to the partner.

During the current year,Norman contributed investment property held for over one year to the Mary Ann Partnership for a 40 percent interest in partnership capital and profits.His tax basis in the property contributed was $8,000,and the property had a fair market value of $10,000 on the date of the contribution to the partnership.What gain or loss should Norman report as a result of the contribution of the property to the partnership in exchange for the 40 percent partnership interest?

Jennifer has a 25 percent interest in the Aspen Aircraft partnership.Her basis in her partnership interest is $10,000 at the beginning of the year.The partnership reported the following activity for the year: What is Jennifer's basis in her partnership interest at the end of the year?

Loretta contributes property to a partnership in exchange for a 25 percent partnership interest.The property contributed has a fair market value of $45,000 and a basis of $35,000 on the date of the contribution to the partnership.In addition,Loretta receives a 10 percent partnership interest,valued at $18,000,in exchange for services rendered to the partnership.What is Loretta's basis in her partnership interest,immediately after these transactions?

Guaranteed payments received from a partnership are included in the income of the partner receiving the payments on a cash basis,without regard to the partnership's tax year.

Mario and Luigi are brothers and they are equal partners in Pipes of Your Dreams Plumbing.Mario sells his fancy sports car to the business for $40,000.Mario's basis in the car is $45,000. a.What is the amount of Mario's recognized gain or loss on this transaction,and what is the nature of the gain or loss? b.If the partnership later sells the sports car for $55,000,how much of the gain is recognized?

For tax purposes,in computing the ordinary income of a partnership,a deduction is allowed for:

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

Which of the following statements is true about partnerships?

A partnership generally must adopt the same tax year as its majority partners.