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Advanced Tax Questions Problem

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Question;1) Yong contributes a machine having an adjusted basis of $20000 and a FMV of $25000for a 10% partnership interest. Yong had taken $10000 of depreciation prior to thecontribution. The partnership has no liabilities. As a result of the contribution, Yongmust recognize:A) No gain or lossB) A $5000 sec. 1245 gainC) A $5000 capital gainD) $10,000 ordinary income2) Identify which of the following statements is true.a) The contribution of Sec. 1245 property to a partnership triggers a recognition of ordinaryincome by the contributor at the time of the transfer.b) A partner may not recognized ordinary income when receiving a capital and profitsinterest in a partnership in exchange for services.c) When a partnership interest is given to a partner in exchange for services, the partnershipcan deduct or capitalize the FMV of the services, depending on the nature of the services.d) All of the above are false.3)a)b)c)Identify which of the following statements is true.A contribution of services for a partnership interest is a tax-free transactionFor federal income tax purposes, formation of a partnership is governed by Sec. 721.When a partnership assumes a liability on property contributed by a partner, the onlyeffect on the contributing partners basis in his or her partnership interest is that his or herbasis will be increased by the amount of the liability assumed by the other partnersd) All the above are false.4) When determining the guaranteed payment, which of the following is correct?A) If the distributed share is less that the guaranteed minimum amount, the guaranteedpayment is equal to the difference between the distributive share and the guaranteedminimum amount.B) If the distributive share is greater than the guaranteed minimum amount, the guaranteedpayment is equal to the difference between the distributive share and the guaranteedpayment amount.C) Guaranteed payments are payments determined with regard to partnership income.D) The distinction between guaranteed payments and the distributive share is clear inpractice.5) Identify which of the following statements is true.A) A partners relief of debt is treated as if the partner receives a cash distribution.B) When a partnership assumes any liabilities of the transferor, the transferor has anincrease in the basis of his or her partnership interest.C) Gain recognized by a contributing partner because of the assumptions of liabilities bythe partnership increases the partnership basis in the contributed property.D) All of the above are false.6) Jane contributes land with a FMV of $100,000 and a basis of $40,000 to the GreenPartnership in exchange for a 25% partnership interest. The partnership assumes the$80,000 mortgage on the land. Mary has a 25% share of partnership liabilities. TheGreen Partnership has $8,000 in liabilities immediately before Janes contribution.How much income does Jane recognize on the contribution?What is Janes basis in her partnership interest?7) The WE partnership reports the following items for its current tax year.ItemIncomeOperating income$90,000Rental Income$15,000Interest incomeTax Exempt municipal bonds$2,000Corporate Bonds$4,000Sec. 1231 gain$20,000Sec. 1245 gain$18,000Long Term Capital Gain$7,000ExpensesRental Expenses$12,000Salaries paid to employees (not partners) $30,000Charitable Contributions$5,000Interest paid relating to borrowings usedTo finance municipal bonds$3,000What is the WE partnerships ordinary income for the current year?8)Janice has a 30% interest in the Jansen Partnership. She is to receive a guaranteedpayment for deductible services of $50,000. The partnership reports $30,000 of ordinaryincome and a $100,000 long- term capital gain before deducting the guaranteedpartnership.A) What is her income from the partnership?B) What is her basis in her partnership basis at year-end?9) Jerry has a 10% interest in the EKG partnership capital, profits, and losses. He is alimited partner. At the beginning of the current year, his basis in his partnership interestis $10,000. The partnership earned $20,000 of ordinary income this year and repaid$150,000 liability.A) Is the repayment of the liability a taxable event for Jerry? If so, what are the amountand character of the income reported?

 

Paper#39284 | Written in 18-Jul-2015

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