Chapter 10 Income Tax
On July 1 of the current year, Amaya was admitted to the partnership of Peters and Parker. Her contribution to capital consisted of 500 shares of stock in Paniculata Corporation, which she bought in 2016 for $10,000 and which had a fair market value of $50,000 on July 1 of the current year. Amaya's interest in the partnership's capital and profits is 25 percent. On July 1 of the current year, the fair market value of the partnership's net assets (after Amaya was admitted) was $200,000. What is Amaya's taxable gain in the current year on the exchange of stock for her partnership interest?
$0 gain or loss
Which of the following about partnerships is true?
A partner's initial basis in a partnership interest is equal to the basis of the property transferred (plus cash contributed) to the partnership, adjusted for gain and liabilities.
Which of the following would be considered nonrecourse?
A real estate loan that allows the bank to take the real estate if the taxpayer stops making payments.
Which of the following statements about partnerships is true?
An LLC is generally treated as a partnership for tax law purposed.
Which of the following is true about and LLC?
An LLC liability is similar to a corporation's
Which one of the following statements about partnerships is true?
An LLC limits certain liabiltiy risks
Which of the following items must be reported separately from ordinary income or loss on a partnership return?
Capital Losses
Barry owns a 50 percent interest in B&B Interests, a partnership. His brother, Benny, owns a 35 percent interest in that same partnership, and the remaining 15 percent is owned by an unrelated individual. During the current year, Barry sells a rental property with a basis of $60,000 to B&B Interests for $100,000. The partnership intends to hold the rental as inventory for resale. What is the amount and nature of Barry's gain or loss on this transaction?
$40,000 ordinary income
At the beginning of the year, Amira's basis in her partnership interest was $5,000. During the year, Amira contributed $10,000 in cash to the partnership and signed a bank loan to be personally liable for the partnership's debt of $25,000. For the current year, the partnership allocated a loss of $60,000 to Amira. In the following year, Amira's portion of the partnership income is $30,000. Which of the following is accurate?
In the following year, Amira's reportable taxable income from the partnership is $10,000.
Which of the following can decrease a partners interest in a partnership?
Losses from operations of the partnership
During the current year, Norman contributed investment property held for over one year to the MaryAnn 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?
No gain or loss
Which of the following is true about the debt of an LLC?
The debt is generally treated as nonrecourse
Which of the following is true about partnerships and their income-reporting process?
The partner's share of income/loss is presented on Schedule K-1.
