* Partnership Cards (4 lvl)
The holding period of property acquired by a partnership as a contribution to the contributing partner's capital account
Includes the period during which the property was held by the contributing partner.
At partnership inception, Black acquires a 50% interest in Decorators Partnership by contributing property with an adjusted basis of $250,000. Black recognizes a gain if The fair market value of the contributed property exceeds its adjusted basis. The property is encumbered by a mortgage with a balance of $100,000.
Neither I nor II.
During the current year, Norman contributed property held more than 1 year to the MaryAnn Partnership for a 40% interest. The total capital after his contribution was $50,000. His tax basis in the property was $8,000, and it had a fair market value of $10,000 at the time of the contribution to the partnership. What gain or loss should Norman report on the contribution of his property to the partnership?
No gain or loss.
Don and Warren formed an equal partnership to build drag-racing vehicles. Don contributed $5,000 in cash, and Warren contributed a truck with a fair market value of $5,000 and an adjusted tax basis of $4,500. They plan to use the truck for hauling parts and cars. When Warren purchased the truck 1 year earlier, he elected to use the straight line method to depreciate the truck using the mid-year convention over its 5-year recovery period. The partnership should
Record the truck on the books at $4,500 and depreciate it over its remaining recovery period using the straight line method and mid-year convention.
Which of the following is true regarding the taxation of a limited partnership?
The limited partnership is a pass-through (nontaxable) entity.
The holding period of a partnership interest acquired in exchange for a contributed capital asset begins on the date
The partner's holding period of the capital asset began.
The method used to depreciate partnership property is an election made by
The partnership and may be any method approved by the IRS.
On March 10, Year 1, Daniel contributed land in exchange for a 25% partnership interest in Parr Company. The fair market value of the land at that time was $40,000, and Daniel's adjusted basis was $25,000. On December 2, Year 3, Parr distributed that land to Daniel. The fair market value at that time was $50,000. What is the amount of Daniel's recognized gain from this transaction?
$0
Strom acquired a 25% interest in Ace Partnership by contributing land having an adjusted basis of $16,000 and a fair market value of $50,000. The land was subject to a $24,000 mortgage, which was assumed by Ace. No other liabilities existed at the time of the contribution. What was Strom's basis in Ace?
$0
An individual is a 50% partner who materially participates in Stone Partnership. The individual's adjusted basis at the beginning of the year was $0. Stone had a $70,000 loss from its business. Stone borrowed $30,000 from a bank of which $20,000 remained unpaid at year end. What amount of loss is the individual allowed in the current year from Stone?
$10,000
In return for a 20% partnership interest, Skinner contributed $5,000 cash and land with a $12,000 basis and a $20,000 fair market value to the partnership. The land was subject to a $10,000 mortgage that the partnership assumed. In addition, the partnership had $20,000 in recourse liabilities that would be shared by partners according to their partnership interests. What amount represents Skinner's basis in the partnership interest?
$13,000
George and Martha are equal partners in G&M Partnership. At the beginning of the current tax year, the adjusted basis of George's partnership interest was $32,500, which included his share of $40,000 of partnership liabilities. During the tax year, the following information applied to G&M: Operating loss $30,000 Interest and dividend income 8,000 Partnership liabilities at end of year 24,000 What was the basis of George's partnership interest at year end?
$13,500
Bill and Ted form a partnership with cash contributions of $40,000 each. Bill is a limited partner. Under the partnership agreement, Bill and Ted share all partnership profits and losses equally. The partnership borrows $100,000 from a local bank to purchase depreciable equipment to be used in the partnership's business. Ted is required under the partnership agreement to pay the creditor if the partnership defaults. Based upon these facts, what are Bill's and Ted's bases in the partnership? Ted Bill
$140,000 $40,000
On January 1 of the current year, the Pizza Partnership was formed. Tony acquired a 25% share in the partnership by contributing both an oven that had an adjusted basis to him of $10,000 and $5,000 in cash. The oven was subject to a $2,000 liability. During the year, the partnership also incurred a $20,000 nonrecourse loan and paid off the entire $2,000 liability attached to the oven. There are no guarantees or loss limitation agreements associated with the nonrecourse loan. Operations for the current year resulted in a $2,000 ordinary loss. What is Tony's basis in the partnership at the end of the current year?
$17,500
Bailey contributed land with a fair market value of $75,000 and an adjusted basis of $25,000 to the ABC Partnership in exchange for a 30% interest. The partnership assumed Bailey's $10,000 recourse mortgage on the land. What is Bailey's basis for his partnership interest?
$18,000
Zachary invested $20,000 for a 30% interest in RST Partnership in the current year. At the same time, Andrea contributed property with a fair market value of $30,000, subject to a $10,000 liability (which the partnership assumed) for a 30% interest. Zachary's distributive share of RST's current year loss was $4,000. Assuming no other transactions occurred, what is Zachary's basis in the partnership at the end of the current year?
$19,000
Arthur is to receive 30% of partnership income, but not less than $5,000. The partnership has net income of $10,000 before any allocation. How much income should Arthur report? Arthur's Other Total Guaranteed Distributive Distributive Payment Share Share
$2,000 $3,000 $5,000
Gray is a 50% partner in Fabco Partnership. Gray's tax basis in Fabco on January 1, 2017, was $5,000. Fabco made no distributions to the partners during 2017 and recorded the following: Ordinary income $20,000 Tax-exempt income 8,000 Portfolio income 4,000 What is Gray's tax basis in Fabco on December 31, 2017?
$21,000
The Salt and Pepper Partnership was formed in January of the current year when Salt and Pepper each contributed $10,000 cash and together began to operate a business as equal partners. Both work full-time in the partnership. The partnership borrowed $40,000 on a nonrecourse basis during the year. There are no guarantees or loss limitation agreements. Operations in the year resulted in a $5,000 ordinary loss, $2,000 tax-exempt income, and an $800 charitable contribution. What is Salt's basis at the end of the current year?
$28,100
In the current year, a partnership reported the following items: Fees earned $500,000 Salary expense 100,000 Utility expense 5,000 Charitable contributions 8,000 Long-term capital gain 2,000 Office supplies 500 What is the partnership's ordinary income?
$394,500
Jane has a 30% interest in a cash-basis general partnership. Her adjusted basis in the partnership was $50,000 at the beginning of Year 1. There were no distributions to Jane during the year. On August 1, Year 1, the partnership borrowed $200,000 for the following reasons: Purchase depreciable business equipment $ 30,000 Pay balance on existing note in full 170,000 All of the partners are personally liable for all partnership debts. The partnership incurred a $250,000 loss in Year 1. What amount can Jane claim as a loss from the partnership on her Year 1 individual income tax return?
$59,000
A limited partnership agreement provides for the following profit allocation formula: 20% of the first $1,000,000 of profit, 25% of the next $1,000,000 of profit, and 30% of profit over $2,000,000 shall be allocated to the general partner. Each limited partner and the general partner shall share equally in the remaining profit based on their relative percentages of ownership. What profit amount should be allocated to a limited partner with 3% ownership if the total profit to be allocated is $4,500,000?
$99,000
Campbell acquired a 10% interest in Vogue Partnership by contributing a building with an adjusted basis of $40,000 and a fair market value of $90,000. The building was subject to a $60,000 mortgage that was assumed by Vogue. The other partners contributed cash only. The basis of Campbell's partnership interest in Vogue is
$0
In the current year, Dave Burr acquired a 20% interest in a partnership by contributing a parcel of land. At the time of Burr's contribution, the land had a fair market value of $35,000, had an adjusted basis to Burr of $8,000, and was subject to a mortgage of $12,000. Payment of the mortgage was assumed by the partnership. Burr's basis for his interest in the partnership is
$0
The following information pertains to Carr's admission to the Smith & Jones partnership on July 1, 2017: Carr's contribution of capital: 800 shares of Ed Corporation stock bought in 1999 for $30,000; fair market value of $150,000 on July 1, 2017. Carr's interest in capital and profits of Smith & Jones: 25%. Fair market value of net assets of Smith & Jones on July 1, 2017, after Carr's admission: $600,000. Carr's gain in 2017 on the exchange of the Ed stock for Carr's partnership interest was
$0
On September 30, Year 1, Robert retired from his partnership. At that time, his adjusted basis was $40,000, which included his $15,000 share of the partnership's liabilities. In liquidation of Robert's interest in partnership property, he was relieved of his share of the partnership liabilities and received cash retirement payments of $2,500 per month for 15 months, beginning October 1, Year 1. Both Robert and the partnership use a calendar tax year. How much must Robert report as capital gain in Year 1 and Year 2? Year 1 Year 2
$0 $12,500
Earl acquired a 20% interest in a partnership by contributing property that had an adjusted basis to him of $8,000 and that was subject to a mortgage of $12,000. Which of the following results indicates the amount of capital gain recognized and the basis of the partnership interest? Capital Gain Basis of Recognized Partnership Interest
$1,600 $0
Mr. A, Mr. B, and Mr. C formed a calendar-year partnership. Profits and losses are to be shared equally. Mr. A contributed a building to be used in the business that had an adjusted basis to him of $10,000 and a fair market value of $13,000. The partnership also assumed Mr. A's $6,000 mortgage on the building. Mr. B and Mr. C each contributed $4,000 in cash to the partnership's capital. What is the partnership's basis for determining depreciation on the building?
$10,000
Pert contributed land with a fair market value of $20,000 to a new partnership in exchange for a 50% partnership interest. The land had an adjusted basis to Pert of $12,000 and was subject to a $4,000 mortgage, which the partnership assumed. What is the adjusted basis of Pert's partnership interest?
$10,000
Taxpayer A contributed stock with a FMV of $10,000 and a basis of $5,000 to ABC Partnership (which would be treated as an investment company if it had been incorporated) for a 50% interest. What is the partnership's basis in the stock?
$10,000
Partner A received inventory items with a basis of $20,000 in complete dissolution of a partnership. Within 5 years, Partner A sells the entire inventory for $30,000. What amount and type of gain should Partner A report?
$10,000 ordinary gain.
On June 1, 2017, Kelly received a 10% interest in Rock Co., a partnership, for services contributed to the partnership. Rock's net assets at that date had a basis of $70,000 and a fair market value of $100,000. In Kelly's 2017 income tax return, what amount must Kelly include as income from transfer of partnership interest?
$10,000 ordinary income.
A, B, and C formed a calendar-year partnership. Profits and losses are to be shared equally. A contributed a building to be used in the business that had an adjusted basis to A of $100,000 and a fair market value of $130,000. The partnership also assumed A's $60,000 mortgage on the building. B and C each contributed $40,000 in cash to the partnership's capital. What is the partnership's basis for determining depreciation on the building?
$100,000
Dunn and Shaw are partners who share profits and losses equally. In the computation of the partnership's 2017 book income of $100,000, guaranteed payments to partners totaling $60,000 and charitable contributions totaling $1,000 were treated as expenses. What amount should be reported as ordinary income on the partnership's 2017 return?
$101,000
Nolan designed Timber Partnership's new building. Nolan received an interest in the partnership for the services. Nolan's normal billing for these services would be $80,000, and the fair market value of the partnership interest Nolan received is $120,000. What amount of income should Nolan report?
$120,000
Sharon's basis in S & P partnership is $185,000. In a complete liquidation of Sharon's interest in S & P, Sharon received the following: S & P's Basis Fair Market Value Cash $5,000 $5,000 Building $50,000 $100,000 Land $40,000 $50,000 What is Sharon's basis in the building?
$120,000
Andrew is a 40% partner in the ABC Partnership, in which capital is a material income-producing factor. He gives one-half of his interest to his brother, John. During the current year, Andrew performs services for the partnership for which reasonable compensation is $65,000 but for which he accepts no pay. Andrew and John are each credited with a $100,000 distributive share of the partnership's ordinary income. How much should Andrew report?
$132,500
Two partners each own an equal interest in a general partnership. One partner contributes to the partnership a building that has an adjusted basis of $40,000 and a fair market value of $60,000. The asset is subject to a mortgage of $30,000, which is assumed by the partnership. What is the contributing partner's share of liabilities in the partnership?
$15,000
Jeffrey, the sole proprietor of a hardware business, hired Eastwood on January 1, 2014, for an agreed salary and a promise to give him a 25% ownership interest if he were still employed at the end of 3 years, and an additional 25% interest if he continued in the business for a second 3-year period. On January 1, 2017, a partnership was formed, and Eastwood received a 25% interest in the capital and profits of the business. On that date, the net worth of the partnership was $60,000. What is Eastwood's tax basis of his partnership interest at January 1, 2017, and what amount should be added to his gross income for 2017? Partnership Addition to Interest Gross Income
$15,000 $15,000
Bob acquired a 50% interest in a partnership by contributing depreciable property that had an adjusted basis of $15,000 and a fair market value of $45,000. The property was subject to a liability of $32,000, which the partnership assumed for legitimate business purposes. What is the partnership's basis in the property for depreciation?
$16,000
Sunshine Partnership is owned equally by partners Buddy, Jeb, and Bob. Sunshine owns an intangible asset with a basis of $0 and a fair market value of $800, a printing machine with a basis of $300 and a fair market value of $2,000, and a collating machine with a basis of $150 and a fair market value of $200. Bob has a basis of $400 in his partnership interest. The intangible asset and the other collating machine are distributed to Bob in liquidation of his interest. What are Bob's bases in his intangible asset and collating machine? Machine Intangible
$165 $235
Partners Ann, Bob, and Carol of ABC, a calendar-year partnership, share partnership profits and losses in a ratio of 5:3:2, respectively. All three materially participate in the partnership business. Each partner's adjusted basis in the partnership as of December 31, 2017, was as follows: Ann $19,000 Bob 22,000 Carol 9,000 The partnership incurred an operating loss of $50,000 in 2017. What are Ann's, Bob's, and Carol's shares of the loss to be reported on their 2017 individual income tax returns? Ann Bob Carol
$19,000 $15,000 $9,000
A and B formed a partnership by transferring the following assets to the partnership: A transferred $25,000 in cash and equipment, which cost $27,000, had an adjusted basis of $19,800, and had a fair market value of $30,000; B transferred cash of $50,000. The partnership's basis in equipment transferred to the partnership by A is
$19,800
At December 31, 2016, Burns and Cooper were equal partners in a partnership with net assets having a tax basis and fair market value of $100,000. On January 1, 2017, Todd contributed securities with a fair market value of $50,000 (purchased in 2015 at a cost of $35,000) to become an equal partner in the new firm of Burns, Cooper, and Todd. The securities were sold on December 15, 2017, for $65,000. How much of the partnership's capital gain from the sale of these securities should be allocated to Todd?
$20,000
Walker transferred property used in a sole proprietorship to the WXYZ partnership in exchange for a one-fourth interest. The property had an original cost of $75,000, an adjusted tax basis to Walker of $20,000, and fair market value of $50,000. The partnership has no liabilities. What is Walker's basis in the partnership interest?
$20,000
Fact Pattern: Jones and Curry formed Major Partnership as equal partners by contributing the assets below: Adjusted Fair Market Asset Basis Value Jones Cash $45,000 $45,000 Curry Land 30,000 57,000 The land was held by Curry as a capital asset, subject to a $12,000 mortgage, which was assumed by Major. What was Curry's initial basis in the partnership interest?
$24,000
Dean is a 25% partner in Target Partnership. Dean's tax basis in Target on January 1, Year 1, was $20,000. At the end of Year 1, Dean received a nonliquidating cash distribution of $8,000 from Target. Target's Year 1 accounts recorded the following items: Municipal bond interest income $12,000 Ordinary income 40,000 What was Dean's tax basis in Target on December 31, Year 1?
$25,000
Partnership P has an operating loss of $10,000 for the year. Partner A had a 50% interest in the partnership, with a basis of $5,000 at the beginning of the year. P distributed $2,000 to A during the year. What amount of loss is deductible by A?
$3,000
Anderson and Decker are equal members in Andek, an LLC, which has not elected to be treated as a corporation. Anderson contributes $7,000 cash, and Decker contributes a machine with an adjusted basis of $5,000 and fair market value of $10,000, subject to a liability of $3,000. What is Decker's basis in Andek?
$3,500
Ben Krug, sole proprietor of Krug Dairy, hired Jan in 2011 for an agreed salary and the promise of a 10% partnership capital interest if Jan continued in Krug's employ until the end of 2016. On January 1, 2017, when the net worth of the business was $300,000, the partnership was formed as agreed. On what amount will Jan have to pay tax in 2017 for the partnership capital interest she received?
$30,000
On January 2, 2017, Arch and Bean contribute cash equally to form the JK Partnership. Arch and Bean share profits and losses in a ratio of 75% to 25%, respectively. For 2017, the partnership's ordinary income was $40,000. A distribution of $5,000 was made to Arch during 2017. What is Arch's share of taxable income for 2017?
$30,000
Ola Associates is a limited partnership engaged in real estate development. Hoff, a civil engineer, billed Ola $40,000 in 2016 for consulting services rendered. In full settlement of this invoice, Hoff accepted, in 2017, a $15,000 cash payment plus the following: Fair Carrying Market Amount on Value Ola's Books 3% limited partnership interest in Ola $10,000 N/A Surveying equipment 7,000 $3,000 What amount should Hoff, a cash-basis taxpayer, report in his 2017 return as income for the services rendered to Ola?
$32,000
Clark and Lewis share profits and losses of 60% and 40%, respectively. The tax basis of each partner's interest in the partnership as of December 31, 2016 was as follows: Clark $24,000 Lewis $18,000 During 2017, the partnership had ordinary income of $50,000 and a long-term capital loss of $10,000 from the sale of securities. There were no distributions to the partners during 2017. What is the amount of Lewis's tax basis as of December 31, 2017?
$34,000
A partner received a partnership interest with a fair market value (FMV) of $55,000 in exchange for the following items: Basis FMV Cash $20,000 $20,000 Property 10,000 30,000 Services rendered 0 5,000 What is the partner's basis in the partnership interest?
$35,000
James Elton received a 25% capital interest in Bredbo Associates, a partnership, in return for services rendered, plus a contribution of assets with a basis to Elton of $25,000 and a fair market value of $40,000. The fair market value of Elton's 25% interest was $50,000. How much is Elton's basis for his interest in Bredbo?
$35,000
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 Charitable contributions 3,000 What would PDK report as non-separately stated income for Year 1 tax purposes?
$35,000
Evan, a 25% partner in Vista Partnership, received a $20,000 guaranteed payment in 2017 for deductible services rendered to the partnership. Guaranteed payments were not made to any other partner. Vista's 2017 partnership income consisted of Net business income before guaranteed payments $80,000 Net long-term capital gains 10,000 What amount of income should Evan report from Vista Partnership on her 2017 tax return?
$37,500
Kline and Salomon form the KS Partnership as 50/50 partners. Kline contributes equipment that has a fair market value of $60,000 and an adjusted basis of $45,000. In addition, the equipment is subject to a $10,000 loan that KS Partnership is assuming. What amount represents Kline's initial basis in the partnership?
$40,000
Barker acquired a 50% interest in Kode Partnership by contributing $20,000 cash and a building with an adjusted basis of $26,000 and a fair market value of $42,000. The building was subject to a $10,000 mortgage, which was assumed by Kode. The other partners contributed cash only. The basis of Barker's interest in Kode is
$41,000
Mr. Booth has a 20% interest in Partnership X. On April 1 of the current year, Mr. Booth contributed equipment to the partnership for use in the business. At the time of the transfer, the equipment had a fair market value of $60,000 and an adjusted basis of $41,000. Partnership X's basis for depreciation is
$41,000
Jetson and Tomson are equal partners in JT Partnership, which has the following income and expense items: Sales $100,000 Interest income from checking account 1,000 Charitable contributions 3,000 Employee wages 4,000 Cost of goods sold 50,000 What is the nonseparately stated partnership income?
$46,000
Able and Baker are equal members in Apple, an LLC. Apple has elected not to be treated as a corporation. Able contributes $7,000 cash and Baker contributes a machine with a basis of $5,000 and a fair market value of $10,000, subject to a liability of $3,000. What is Apple's basis for the machine?
$5,000
The adjusted basis of Mr. E's partnership interest was $65,000. In a partial liquidation, Mr. E exchanged one-half of his interest for the following properties: Adjusted Basis Fair Market Value Cash $60,000 $60,000 Inventory 15,000 20,000 Land 15,000 5,000 $90,000 $85,000 The inventory was not substantially appreciated, nor did the partnership have any unrealized receivables. As a result of the partial liquidation, Mr. E's proportionate share of partnership liabilities also declined by one-half, or $10,000. The partnership had no other liabilities. What is Mr. E's total recognized gain or loss on the disposition? Capital Gain Ordinary Income
$5,000 $0
On January 2, Year 1, Black acquired a 50% interest in New Partnership by contributing property with an adjusted basis of $7,000 and a fair market value of $9,000, subject to a mortgage of $3,000. What was Black's basis in New at January 2, Year 1?
$5,500
Dale's distributive share of income from the calendar-year partnership of Dale & Eck was $50,000 in 2017. On December 15, 2017, Dale, who is a cash-basis taxpayer, received a $27,000 distribution of the partnership's 2017 income, with the $23,000 balance paid to Dale in May 2018. In addition, Dale received a $10,000 interest-free loan from the partnership in 2017. This $10,000 is to be offset against Dale's share of 2018 partnership income. What total amount of partnership income is taxable to Dale in 2017?
$50,000
Kerr and Marcus form KM Partnership with a cash contribution of $80,000 from Kerr and a property contribution of land from Marcus. The land has a fair market value of $80,000 and an adjusted basis of $50,000 at the date of the contribution. Kerr and Marcus are equal partners. What is Marcus's basis immediately after formation?
$50,000
Molloy contributed $40,000 in cash in exchange for a one-third interest in the RST Partnership. In the first year of partnership operations, RST had taxable income of $60,000. In addition, Molloy received a $5,000 distribution of cash and, at the end of the partnership year, had a one-third share in the $18,000 of partnership recourse liabilities. What was Molloy's basis in RST at year end?
$61,000
Smith received a one-third interest of a partnership by contributing $3,000 in cash, stock with a fair market value of $5,000 and a basis of $2,000, and a new computer that cost Smith $2,500. Which of the following amounts represents Smith's basis in the partnership?
$7,500
Lee inherited a partnership interest from Dale. The adjusted basis of Dale's partnership interest was $50,000, and its fair market value on the date of Dale's death (the estate valuation date) was $70,000. What was Lee's original basis for the partnership interest?
$70,000
Charles Jordan files his income tax return on a calendar-year basis. He is a 3% partner of a partnership reporting on a June 30 fiscal-year basis. Jordan's share of the partnership's ordinary income was $24,000 for the fiscal year ended June 30, 2016, and $72,000 for the fiscal year ended June 30, 2017. How much should Jordan report on his 2017 return as his share of taxable income from the partnership?
$72,000
Martin acquired a 30% interest in LMN Partnership, a cash-basis partnership, by contributing $15,000 cash and the property listed below. In addition, in order to become a partner, Martin had to assume his share of LMN's liabilities. Partnership liabilities consisted of a $50,000 loan, incurred to purchase assets used in the business. What is the basis of Martin's interest in LMN? Fair Market Martin's Adjusted Additional Property Value on Date Basis on Date Martin Contributed Contributed Contributed Undeveloped land* $150,000 $100,000 Office equipment 30,000 10,000 Delivery van 10,000 3,000 *The undeveloped land was contributed subject to a $100,000 mortgage that was assumed by the partnership.
$73,000
Eng contributed the following assets to a partnership in exchange for a 50% interest in the partnership's capital and profits: Cash $50,000 Equipment: Fair market value 35,000 Adjusted basis 25,000 The partnership has no liabilities. The basis for Eng's interest in the partnership is
$75,000
Frank and Nancy form an equal partnership. Frank contributes $15,000 cash, and Nancy contributes depreciable office equipment with a fair market value of $15,000 and an adjusted basis of $8,000. What is the partnership's basis in the equipment for purposes of depreciation?
$8,000
Acme and Buck are equal members in Dear, an LLC. Dear has elected not to be treated as an LLC. Dear has not elected to be taxed as a corporation. Acme contributed $7,000 cash, and Buck contributed a machine with an adjusted basis of $5,000 and a fair market value of $10,000, subject to a liability of $3,000. What is Acme's basis in Dear?
$8,500
The following information pertains to land contributed by Pink for a 50% interest in a new partnership: Adjusted basis to Pink $100,000 Fair market value 300,000 Mortgage assumed by partnership 30,000 The partnership has no other liabilities. The basis for Pink's partnership interest is
$85,000
Which one of the following statements regarding a partnership's tax year is true?
A partnership may elect to have a tax year other than the generally required tax year if the deferral period for the tax year elected does not exceed 3 months.
In the absence of an election to adopt an annual accounting period, the required tax year for a partnership is
A tax year of one or more partners with a more-than-50% interest in profits and capital.
Maggie and Simon each have a 50% interest in a partnership that started business October 1. Maggie uses a calendar year, while Simon has a fiscal year ending November 30. Which of the following is true?
The partnership may use the fiscal year ending September 30, provided a Sec. 444 election and payment are made, and the partnership may use the fiscal year ending November 30, as that results in the least deferral.
Rose and Irene each have a 50% interest in a partnership that started business on July 1. Rose uses a calendar year, while Irene has a fiscal year ending November 30. Which of the following is true?
The partnership must use the fiscal year ending November 30 because it results in a deferral of 1 month.
Which of the following entities must pay taxes for federal income tax purposes?
C corporation.
The at-risk limitation provisions of the Internal Revenue Code may limit A partner's deduction for his or her distributive share of partnership losses. A partnership's net operating loss carryover.
I only.
In the current year, which taxable year may a newly formed partnership not adopt without obtaining prior approval from the IRS?
A January 31 year end if it is a retail enterprise with a natural business year ending January 31 and all of its majority and principal partners are on a calendar year.
At the beginning of 2017, Paul owned a 25% interest in Associates Partnership. During the year, a new partner was admitted, and Paul's interest was reduced to 20%. The partnership liabilities at January 1, 2017, were $150,000 but decreased to $100,000 at December 31, 2017. Paul's and the other partners' capital accounts are in proportion to their respective interests. Disregarding any income, loss, or drawings for 2017, the basis of Paul's partnership interest at December 31, 2017, compared to the basis of his interest at January 1, 2017, was
Decreased by $17,500.
Which of the following statements is true?
For property that was an unrealized receivable in the hands of the contributing partner, any gain or loss on a disposition by the partnership is ordinary income or loss.
"Hot assets" of a partnership would include which of the following?
Unrealized receivables.
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.
Which of the following limitations will apply in determining a partner's deduction for that partner's share of partnership losses if the partner is an individual? At-Risk Passive Loss
Yes Yes
Which of the following should be used in computing the basis of a partner's interest acquired from another partner? Cash Paid by Transferee's Share Transferee of Partnership to Transferor Liabilities
Yes Yes
Mr. Almond farmed a total of 200 acres of land, comprised of two parcels of land located about one-half mile apart. One parcel was 120 acres, and the second parcel was 80 acres. Mr. Almond found moving his workers and equipment between the two parcels to be very expensive. He approached the ABC farming partnership, which owned 80 acres next to Mr. Almond's 120-acre parcel, about joining the partnership. Mr. Almond has a cost basis of $100,000 in his 80 acres. The fair market value of his 80 acres at the time of the proposed exchange was $400,000, and the fair market value of the ABC partnership's 80 acres was $350,000. In 2017, Mr. Almond transferred his 80 acres to the ABC partnership and received a $350,000 interest in the ABC partnership, plus $50,000 cash. What was the amount of Mr. Almond's recognized gain in 2017?
$50,000
Ralph Elin contributed land to the partnership of Anduz & Elin. Elin's adjusted basis in this land was $50,000, and its fair market value was $75,000. Under the partnership agreement, Elin's capital account was credited with the full fair market value of the land. Anduz made a $75,000 cash contribution to the partnership. Thus, each partner's capital account was credited for $75,000. Elin and Anduz share profits and losses equally. The partnership has no liabilities. What is the adjusted basis of Elin's partnership interest?
$50,000
Turner, Reed, and Sumner are equal partners in TRS partnership. Turner contributed land with an adjusted basis of $20,000 and a fair market value (FMV) of $50,000. Reed contributed equipment with an adjusted basis of $40,000 and an FMV of $50,000. Sumner provided services worth $50,000. What amount of income is recognized as a result of the transfers?
$50,000
Fact Pattern: Jones and Curry formed Major Partnership as equal partners by contributing the assets below: Adjusted Fair Market Asset Basis Value Jones Cash $45,000 $45,000 Curry Land 30,000 57,000 The land was held by Curry as a capital asset, subject to a $12,000 mortgage, which was assumed by Major. What was Jones's initial basis in the partnership interest?
$51,000
Carol sold 50% of her business to her mother. The resulting partnership had income of $200,000. Capital is a material income-producing factor. Carol performed services worth $90,000, which is reasonable compensation, and her mother performed no services. What is the maximum amount of income Carol's mother can report from the partnership for the tax year?
$55,000
Last year, Jim, one of two equal partners, contributed land with a basis to him of $15,000 and a fair market value of $10,000 to the partnership of which he was a member. His capital account was credited for $10,000. The land was later sold for $8,000. As a result of this sale, Jim must report on his personal income tax return
$6,000 loss.
Partnership LIFE's profits and losses are shared equally among the four partners. The adjusted basis of Partner E's interest in the partnership on December 31, Year 1, was $25,000. On January 2, Year 2, Partner E withdrew $10,000 cash. The partnership reported $200,000 as ordinary income on its Year 2 partnership return. In addition, $5,000 for qualified travel, meals, and entertainment was shown on a separate attachment to E's Schedule K-1 of Form 1065. Due to the limitation, $2,500 of the $5,000 is unallowable as a deduction. What is the amount of E's basis in the partnership on December 31, Year 2?
$60,000
ABC is a calendar-year partnership with three partners, Alan, Bob, and Cathy. The profits and losses are shared in proportion to each partner's contributions. On January 1, the ratio was 90% for Alan, 5% for Bob, and 5% for Cathy. On December 1, Bob and Cathy each contributed additional amounts and the new profit and loss sharing ratios were 30% for Alan, 35% for Bob, and 35% for Cathy. For its tax year ending December 31, the partnership had a loss of $1,200. This loss occurred equally over the partnership's tax year. How is the loss allocated?
Alan $1,020, Bob $90, Cathy $90.
Irving Aster, Dennis Brill, and Robert Clark were partners who shared profits and losses equally. On February 28, 2017, Aster sold his interest to Phil Dexter. On March 31, 2017, Brill died, and his estate held his interest for the remainder of the year. The partnership continued to operate and, for the fiscal year ending June 30, 2017, had a profit of $45,000. Assuming that partnership income was earned on a pro rata monthly basis and that all partners were calendar-year taxpayers, the distributive shares to be included in 2017 gross income should be
Aster $10,000, Brill $11,250, Estate of Brill $3,750, Clark $15,000, and Dexter $5,000.
Under Sec. 444 of the Internal Revenue Code, certain partnerships can elect to use a tax year different from their required tax year. One of the conditions for eligibility to make a Sec. 444 election is that the partnership must
Choose a tax year in which the deferral period is not longer than 3 months.
When the AQR partnership was formed, partner Acre contributed land with a fair market value of $100,000 and a tax basis of $60,000 in exchange for a one-third interest in the partnership. The AQR partnership agreement specifies that each partner will share equally in the partnership's profits and losses. During its first year of operation, AQR sold the land to an unrelated third party for $160,000. What is the proper tax treatment of the sale?
The first $40,000 of gain is allocated to Acre, and the remaining gain of $60,000 is shared equally by all the partners in the partnership.
Which of the following statements regarding a Sec. 754 optional basis adjustment election is false?
The new partner elects to adjust the basis of its assets.
