R-V - 06 - Limited Liability Companies

Tucker received a partnership distribution of $20,000 cash and a building with an adjusted basis of $30,000 and a fair market value of $10,000. Tucker's basis in the partnership immediately prior to the distribution was $10,000. What is Tucker's basis in the building?

$0. If the partner's basis in the partnership interest is LESS than the partnership's adjusted basis in the property DISTRIBUTED, the partner's basis in the property distributed is EQUAL to his REMAINING tax basis in his partnership interest. Because Tucker's tax basis in his partnership interest after the cash distribution is ZERO, Tucker's basis in the building received as a distribution is ZERO. (R5, M3 - Partnerships: Part 2)

Jody's basis in her partnership interest was $50,000 immediately before she received a current (nonliquidating, or operating) distribution of $20,000 cash and property with an adjusted basis to the partnership of $40,000 and a fair market value of $35,000. What amount of taxable gain must Jody report as a result of this distribution?

$0. Jody's basis in her partnership interest after the distribution is zero. (R5, M3 - Partnerships: Part 2)

Sutton is a partner of RST Partnership. RST distributed $3,000 cash and a building with an adjusted basis of $10,000 and a fair market value of $50,000 to Sutton. Before the distributions, Sutton's basis in the partnership was $90,000. What amount of these distributions is taxable to Sutton in the current year?

$0. The cash distribution of $3,000 DOES NOT exceed the partner's basis in the partnership interest of $90,000, so NONE of the distributions are taxable income to the partner. (R5, M3 - Partnerships: Part 2)

Day's adjusted basis in LMN Partnership interest is $50,000. During the year, Day received a nonliquidating distribution of $25,000 cash plus land with an adjusted basis of $15,000 to LMN, and a fair market value of $20,000. How much is Day's basis in the land?

$15,000. In a nonliquidating distribution, the partner takes the partnership basis for the asset distributed. This cannot EXCEED the partner's partnership interest basis. (R5, M3 - Partnerships: Part 2)

PDK, LLC, had three members with equal ownership percentages. PDK elected to be treated as a partnership. For the tax year ending December 31, Year 1, PDK had the following income and expense items: Revenues $120,000, Interest income 6,000, Gain on sale of securities 8,000, Salaries 36,000, Guaranteed payments 10,000, Rent expense 21,000, Depreciation expense 18,000, and Charitable contributions 3,000. What would PDK report as non-separately stated income for Year 1 tax purposes?

$35,000. Non-separately stated income is calculated as follows: Revenues $120,000 - Salaries $36,000 - Guaranteed payments $10,000 - Rent expense $21,000 - Depreciation expense $18,000 = Total non-separately stated income $35,000. Note: All other items listed in the question are SEPARATELY STATED. (R5, M3 - Partnerships: Part 2)

An individual partner received a Schedule K-1 from a partnership for Year 2 reporting the following items: Ordinary business income $45,000, Interest income $8,000, Net Section 1231 loss $(5,000), and Cash distribution $6,000. No additional partnership items exist for Year 2. What is the total amount from the partnership that will be included in the partner's adjusted gross income on the partner's Form 1040 for Year 2?

$48,000. Ordinary business income $45,000 + Interest income $8,000 - Net Section 1231 loss $5,000 = Total from partnership included in AGI $48,000. The cash distribution of $6,000 is NOT included in the partner's adjusted gross income; it is INCLUDED on the SCHEDULE K-1 for calculation of the partner's basis in his partnership interest. (R5, M3 - Partnerships: Part 2)

Dale's distributive share of income from the calendar-year partnership of Dale & Eck was $50,000 in Year 1. On December 15, Year 1, Dale, who is a cash-basis taxpayer, received a $27,000 distribution of the partnership's Year 1 income, with the $23,000 balance paid to Dale in May Year 2. In addition, Dale received a $10,000 interest-free loan from the partnership in Year 1. This $10,000 is to be offset against Dale's share of Year 2 partnership income. What total amount of partnership income is taxable to Dale in Year 1?

$50,000. The total amount of partnership income taxable to Dale in Year 1 is $50,000, which is his DISTRIBUTIVE SHARE of partnership income. (R5, M3 - Partnerships: Part 2)

Thompson's basis in Starlight Partnership was $60,000 at the beginning of the year. Thompson materially participates in the partnership's business. Thompson received $20,000 in cash distributions during the year. Thompson's share of Starlight's current operations was a $65,000 ordinary loss and a $15,000 net long-term capital gain. What is the amount of Thompson's deductible loss for the period?

$55,000. A partner's deductible loss is LIMITED to his basis PLUS any amounts that he is PERSONALLY LIABLE for ("at risk" provision). Beginning basis $60.000 + Net LT capital gain$15,000 - Cash distribution $20,000 = Basis for determining allowable loss deduction $55,000. (R5, M3 - Partnerships: Part 2)

Vale is a 50% partner in Ball Partnership. Vale's tax basis in Ball on January 2, Year 1, was $60,000. Ball did not have unrealized receivables, appreciated inventory, or properties that had been contributed by its partners. On December 31, Year 1, Ball made a $10,000 nonliquidating cash distribution to each partner. The Ball Partnership income tax return reported the following items for Year 1: Tax-exempt interest income $80,000 Dividend income 12,000 What total amount of gross income from Ball should be included in Vale's Year 1 adjusted gross income?

$6,000. vale includes only his share of dividend income from the partnership ($12,000 x 50% = $6,000) in adjusted gross income. Adjusted gross income DOES NOT include CASH DISTRIBUTION if the distribution DOES NOT EXCEED the partner's tax basis in the partnership interest PRIOR to distribution. (R5, M3 - Partnerships: Part 2)

Owen's tax basis in Regal Partnership was $18,000 at the time Owen received a nonliquidating distribution of $3,000 cash and land with an adjusted basis of $7,000 to Regal and a fair market value of $9,000. Regal did not have unrealized receivables, appreciated inventory, or properties that had been contributed by its partners. Disregarding any income, loss, or any other partnership distribution for the year, what was Owen's tax basis in Regal after the distribution?

$8,000. Owen's beginning basis $18,000 - Cash received $3,000 - Basis of property received $7,000 = Owen's adjusted basis after the distribution $8,000. (R5, M3 - Partnerships: Part 2)

A domestic liability company not classified as a corporation under IRS regulations is owned entirely by one individual taxpayer. Unless the taxpayer elects otherwise, the company will be taxed as:

A DISREGARDED ENTITY. A single-member limited liability company (LLC) is a disregarded entity that is considered to be the same entity as the owner. If the owner is an individual, the LLC is TAXED as a SOLE PROPRIETORSHIP and the income and deductions are reported on SCHEDULE C of the individual's Form 1040 federal income tax return. (R5, M3 - Partnerships: Part 2)

Two individuals are planning to start a business and need advice on selecting the appropriate form of entity. Their long-term business plan contemplates receiving future in-kind property distributions. Which of the following is a pair of business entities each of which can make a distribution of appreciated property to its owners that would not be taxable to the business entity or to its owners?

General partnership and a LIMITED LIABILITY PARTNERSHIP. In general, a NONLIQUIDATING distribution in a partnership-whether a general partnership or a limited liability partnership-is nontaxable, BOTH as to the partnership and as to the PARTNER. (R5, M3 - Partnerships: Part 2)

The method used to depreciate partnership property is an election made by:

The PARTNERSHIP and may be any method APPROVED by the IRS. (R5, M3 - Partnerships: Part 2)

The individual partner rather than the partnership makes which of the following elections?

Whether to TAKE a DEDUCTION or CREDIT for taxes paid to FOREIGN COUNTRIES. (R5, M3 - Partnerships: Part 2)