Question 1

John has a basis in his partnership interest of $30,000.He receives a current distribution of $6,000 cash,unrealized receivables (FMV $11,000,basis $10,000),inventory (FMV $8,000,basis $4,000),and investment land (FMV $7,000,basis $6,000).The partners' relative interest in the Sec.751 assets do not change as a result of the current distribution.His basis in the land is

Accepted Answer

A) $5,000. 
B) $6,000. 
C) $7,000. 
D) $10,000.

Question 2

Quinn and Pamela are equal partners in the QP Partnership.On December 30 of the current year,the QP Partnership agrees to liquidate Quinn's partnership interest for a cash payment on December 30 of each of the next five years.What tax issues should Quinn and Pamela consider with respect to the liquidation of Quinn's partnership interest?

Accepted Answer

The answer of Quinn and Pamela are equal partners in...

Question 3

Danielle has a basis in her partnership interest of $12,000.She receives a current distribution of $8,000 cash and equipment with a basis of $7,000.There is no potential gain under Sec.737.What is her basis in the equipment?

Accepted Answer

A) $0 
B) $4,000 
C) $7,000 
D) none of the above

Question 4

Jerry has a $50,000 basis for his interest in JJ Partnership before receiving a current distribution consisting of $8,000 in money,accounts receivable having a zero basis to the partnership,and land having a $28,000 basis to the partnership.What will Jerry's basis be in these assets?

Accepted Answer

The answer of Jerry has a $50,000 basis for his...

Question 5

If a partnership chooses to form an LLC,under the check-the-box rules,and assuming no elections are made,the entity will be taxed as

Accepted Answer

A) a partnership if it has more than one member. 
B) an S corporation. 
C) a C corporation. 
D) Unable to determine from the facts presented.

Question 6

The limited liability company (LLC)has become a popular business form because of its limited liability protection for its owner.The S corporation also provides limited liability protection for its owner.What advantages does an LLC provide that are not available with an S corporation?

Accepted Answer

The answer of The limited liability company (LLC)has become a...

Question 7

The XYZ Partnership owns the following assets on December 31:  By how much must XYZ reduce its unrealized receivables to avoid meeting the substantially appreciated inventory test?

Accepted Answer

A) $10,000 
B) $14,000 
C) $15,000 
D) No amount of reduction of unrealized receivables will affect meeting the substantially appreciated inventory test.

Question 8

A partner can recognize gain,but not loss,on a liquidating distribution.

Accepted Answer

A) True 
 B)False

Question 9

Identify which of the following statements is true.

Accepted Answer

A) Under the check-the-box rules,an LLC with more than one member is taxed as a corporation unless it elects to be taxed as a partnership. 
B) The partnership's tax year closes with respect to a partner whose interest is transferred by gift. 
C) An LLC has been taxed as a partnership for five years.Under the check-the-box rules,the LLC makes a timely election in 2009 to be taxed as a C corporation.The election of C corporation status is permitted and results in the LLC's assets being transferred from a partnership to a C corporation under the federal income tax rules. 
D) All of the above are false.

Question 10

Marc is a calendar-year taxpayer who owns a 30% capital and profits interest in the MN Partnership.Nancy sells the remaining 70% capital and profits interest to Henry on October 31.The partnership year-end is March 31 as permitted by the IRS for business purpose reasons.The MN Partnership

Accepted Answer

A) terminates on March 31. 
B) terminates on October 31. 
C) terminates on December 31. 
D) does not terminate.

Question 11

The ABC Partnership owns the following assets on December 31.  The indication that ABC owns substantially appreciated inventory is

Accepted Answer

A) the total FMV of all assets except cash is greater than their total basis. 
B) the FMV of all assets except land is $90,000 while their bases is $40,000. 
C) the FMV of the inventory is $30,000 while its adjusted basis is $20,000. 
D) the FMV of the inventory and unrealized receivables is $70,000 while their adjusted bases is $20,000.

Question 12

A limited liability company is a form of business entity that combines the legal benefits of the corporate form with the tax benefits of the partnership form.

Accepted Answer

A) True 
 B)False

Question 13

For tax purposes,a partner who receives retirement payments ceases to be regarded as a partner

Accepted Answer

A) on the last day of the taxable year in which the partner retires. 
B) on the last day of the month in which the partner retires. 
C) on the day on which the partner retires. 
D) only after the partner's last payment is received.

Question 14

The CHS Partnership's balance sheet presented below is prepared on a cash basis at September 30 of the current year.
   Cindy withdraws from the partnership under an agreement whereby she takes one-third of each of the three assets and assumes $10,000 of the notes payable.Her basis for the partnership interest before any distribution is $25,000.What gain/loss should she report for tax purposes?

Accepted Answer

The answer of The CHS Partnership's balance sheet presented below...

Question 15

The STU Partnership,an electing Large Partnership,has no passive activities and reports the following transactions for the year: net long-term capital losses $50,000,Sec.1231 gain $60,000,ordinary income $20,000,charitable contributions $15,000,and tax-exempt income $2,000.How much will be reported as ordinary income to its partners?

Accepted Answer

A) $5,000 
B) $17,000 
C) $20,000 
D) $22,000

Question 16

Tony sells his one-fourth interest in the WindyCity Partnership to Bill for $100,000 cash when the partnership's assets are as follows:
  The partnership has no liabilities on the sale date.Tony's basis in his partnership interest on the date of the sale is $60,000.What is the allocation of Tony's gain to the assets received?

Accepted Answer

The answer of Tony sells his one-fourth interest in the...

Question 17

A partnership terminates for tax purposes

Accepted Answer

A) only when it terminates under local partnership law. 
B) when at least 50% of the total interest in partnership capital and profits changes hands by sale or exchange within twelve consecutive months. 
C) when the sale of partnership assets is made only to an outsider(s)and not to an existing partner(s). 
D) when a partnership tax return (Form 1065)ceases to be filed by the partnership.

Question 18

Under Sec.751,unrealized receivables include potential Section 1245 or 1250 recapture on the partnership's depreciable property.

Accepted Answer

A) True 
 B)False

Question 19

The STU Partnership,an electing Large Partnership,has no passive activities and reports the following transactions for the year: net long-term capital losses $50,000,Sec.1231 gain $60,000,ordinary income $20,000,charitable contributions $15,000,and tax-exempt income $2,000.How much will be reported as long-term capital gains to its partners?

Accepted Answer

A) $0 
B) $10,000 
C) $50,000 
D) $60,000

Question 20

All states have adopted laws providing for limited liability companies.Describe a limited liability company (LLC).

Accepted Answer

The answer of All states have adopted laws providing for...

Exam 10: Special Partnership Issues

Danielle has a basis in her partnership interest of $12,000.She receives a current distribution of $8,000 cash and equipment with a basis of $7,000.There is no potential gain under Sec.737.What is her basis in the equipment?

Jerry has a $50,000 basis for his interest in JJ Partnership before receiving a current distribution consisting of $8,000 in money,accounts receivable having a zero basis to the partnership,and land having a $28,000 basis to the partnership.What will Jerry's basis be in these assets?

If a partnership chooses to form an LLC,under the check-the-box rules,and assuming no elections are made,the entity will be taxed as

The limited liability company (LLC)has become a popular business form because of its limited liability protection for its owner.The S corporation also provides limited liability protection for its owner.What advantages does an LLC provide that are not available with an S corporation?

The XYZ Partnership owns the following assets on December 31: By how much must XYZ reduce its unrealized receivables to avoid meeting the substantially appreciated inventory test?

A partner can recognize gain,but not loss,on a liquidating distribution.

Identify which of the following statements is true.

Marc is a calendar-year taxpayer who owns a 30% capital and profits interest in the MN Partnership.Nancy sells the remaining 70% capital and profits interest to Henry on October 31.The partnership year-end is March 31 as permitted by the IRS for business purpose reasons.The MN Partnership

The ABC Partnership owns the following assets on December 31. The indication that ABC owns substantially appreciated inventory is

A limited liability company is a form of business entity that combines the legal benefits of the corporate form with the tax benefits of the partnership form.

For tax purposes,a partner who receives retirement payments ceases to be regarded as a partner

A partnership terminates for tax purposes

Under Sec.751,unrealized receivables include potential Section 1245 or 1250 recapture on the partnership's depreciable property.

All states have adopted laws providing for limited liability companies.Describe a limited liability company (LLC).