FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 21: Partnerships

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

True/False

Review LaterAdd Note

Review Later

The MNO Partnership,a calendar year taxpayer,was formed on July 1 of the current year and started business on October 1.MNO incurred $30,000 in startup costs.MNO may deduct $5,000 and amortize the remaining $25,000 over 120 months starting in July.

A) True
B) False

Correct Answer

verified

Show Answer

Question 42

Essay

Review LaterAdd Note

Review Later

Andrew contributes property with a fair market value of $6,000,000 and an adjusted basis of $2,000,000 to AP Partnership.Andrew shares in $3,000,000 of partnership debt under the liability sharing rules,giving him an initial adjusted basis for his partnership interest of $5,000,000.One month after the contribution,Andrew receives a cash distribution from the partnership of $3,000,000.Andrew would not have contributed the property if the partnership had not contractually obligated itself to make the distribution.Assume Andrew's share of partnership liabilities will not change as a result of this distribution.

Correct Answer

verified

Show Answer

Question 43

Multiple Choice

Review LaterAdd Note

Paul sells one parcel of land (basis of $200,000) for its fair market value of $250,000 to a partnership in which he owns a 75% capital interest.Paul held the land for investment purposes.The partnership is in the real estate development business,and will build residential housing (for sale to customers) on the land.Paul will recognize:

Shelby,a partner in the STU partnership,received a proportionate nonliquidating distribution of $50,000 cash,unrealized receivables with a basis of $0 and a fair market value of $40,000,and land with a basis of $35,000 and a fair market value of $25,000.Her basis in the partnership interest immediately before the distributions was $70,000.She will recognize $0 gain on the distribution,and her basis in the receivables and land will be $0 and $20,000 respectively.

A limited liability company offers all "members" protection from claims by the LLC's creditors.

Which of the following statements,if any,about an LLC is false?

A distribution cannot be "proportionate" if only one partner receives assets from the partnership.

The LMO Partnership distributed $30,000 cash to Emma in a proportionate,nonliquidating distribution.Emma's basis in her partnership interest was $25,000 immediately before the distribution.As a result of the distribution,Emma's basis is reduced to $0 and she recognizes a $5,000 gain.

The taxable income of a partnership flows through to the partners,who report the income on their tax returns.

Megan's basis was $100,000 in the MAR Partnership interest just before she received a proportionate nonliquidating distribution consisting of land held for investment (basis of $80,000,fair market value of $100,000) and inventory (basis of $60,000,fair market value of $60,000) .After the distribution,Megan's bases in the land and inventory are,respectively:

Allison and Taylor form a partnership by each making contributions of $90,000 cash to partnership capital.The partnership purchases an asset for $600,000,using the cash and financing the rest with a $420,000 recourse note.Allison is allocated 75% of partnership profits and losses until the date when the total partnership profits exceed total partnership losses.After that date,the profits and losses are shared equally between the two partners.The partners expect the partnership to have losses for the first three years of operations and profits thereafter.How will the recourse debt be shared between the partners for basis purposes immediately after the property is acquired?

Victor is a 40% owner (member) of Real Properties R Us,LLC (RPRU) .During the current tax year,RPRU reported a loss from rental real estate activities of ($200,000) which is treated as a passive loss.Victor is a material participant in RPRU and meets the active participation requirements for rental real estate activities.His modified AGI is $120,000.In addition,Victor has passive income from other sources of $60,000.Assuming Victor meets the basis and at risk limitations,what amount of the RPRU loss may Victor deduct under the passive loss rules?

Andrew receives a proportionate nonliquidating distribution from the AEF Partnership.The distribution consists of $50,000 cash and property (adjusted basis to the partnership of $34,000 and fair market value of $42,000) .Immediately before the distribution,Andrew's adjusted basis in the partnership interest was $40,000.His basis in the noncash property received is:

William is a general partner in the WST partnership.During the current year,he receives a guaranteed payment of $10,000 for services he provides to the partnership,and his distributive share of partnership income is $30,000.William is required to pay self-employment tax on the $10,000 guaranteed payment,but not on his distributive share of partnership income.

Anthony's basis in the WAM Partnership interest was $200,000 just before he received a proportionate liquidating distribution consisting of investment land (basis of $90,000,fair market value $100,000) ,and inventory (basis of $30,000,fair market value $70,000) .After the distribution,Anthony's recognized gain or loss and his basis in the land and inventory are:

Tina sells her 1/3 interest in the TAX Partnership to James for $60,000 cash plus the assumption of Tina's $4,000 share of partnership debt.On the sale date,the partnership balance sheet and agreed-upon fair market values were as follows: As a result of the sale,Tina recognizes:

Shane made a contribution of property to the newly formed QRST Partnership.The property had a $80,000 adjusted basis to Shane and a $150,000 fair market value on the contribution date.The property was also encumbered by a $90,000 nonrecourse debt,which was transferred to the partnership on that date.Another partner,Rachel,shares 20% of the partnership income,gain,loss,deduction,and credit.Under IRS regulations,Rachel's share of the nonrecourse debt for basis purposes is:

The partnership must allocate nonrecourse debt among the partners according to the "constructive liquidation scenario."

Morgan and Kristen formed an equal partnership on August 1 of the current year.Morgan contributed $60,000 cash and land with a basis of $18,000 and a fair market value of $40,000.Kristen contributed equipment with a basis of $42,000 and a value of $100,000.Kristen's tax basis in her interest is $42,000; Morgan's tax basis is $78,000.

Jeremy receives a proportionate nonliquidating distribution from the JKL Partnership when the basis of his interest is $100,000.The distribution consists of cash of $25,000,land with a basis of $30,000 and a fair market value of $65,000,and inventory with a partnership basis of $50,000 and fair market value of $60,000.As a result of this distribution,Jeremy recognizes a $50,000 gain and takes a $65,000 basis in the land and a $60,000 basis in the inventory.