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Partnerships?Distributions, Sales, and Exchanges Ch-20




Question;Partnerships?Distributions;Sales, and Exchanges;TRUE-FALSE;QUESTIONS?CHAPTER 20;1.;Only a cash basis partnership is concerned with the problem of ?unrealized;receivables.?;2. The;inclusion of accounts receivable of an accrual basis partnership in the;determination of its ?substantially appreciated inventory items? reduces the;chances of the partnership being affected by Section 751.;3. A;partner's interest in a partnership is a capital asset.;4.;When a partner acquires an interest in a partnership by purchase, the basis of;the underlying assets of the partnership must be adjusted to reflect the price;the incoming partner paid for his interest.;5.;Where property for which a special basis adjustment was made because a;partnership interest was purchased is distributed to a nonpurchasing partner;the basis adjustment carries over to the distributee partner.;6.;With respect to the allocation of a basis adjustment to partnership assets, the;total fair market value of all of the assets is compared with the total;adjusted basis of those same assets and the difference between the two amounts;is allocated to each asset based upon its relative adjusted basis.;7. A;partner who receives a current property distribution (other than cash), made;pro rata to all the partners, will not have to report a gain with respect to;the distribution.;8. As;a general rule, property distributed to a partner, not in liquidation of an;interest in the partnership, takes the same basis in the hands of the partner;as it had in the hands of the partnership.;9. If;the partnership agreement is silent but the partners recognize that a retiring;partner had created substantial goodwill for the partnership while a partner, the;retiring partner may report as capital gain so much of the payments for the;partnership interest as are designated as payment ?for goodwill.?;10. A;partnership may elect to adjust the basis of its property merely because one;partner sells an interest to another partner and there is no transfer of any;partnership assets involved.;MULTIPLE;CHOICE QUESTIONS?CHAPTER 20;11. On;April 1, George Hart, Jr. acquired a 25 percent interest in the Wilson, Hart;and Company partnership by gift from his father. The 25 percent partnership;interest had been acquired by a $50,000 cash investment by Hart, Sr. 10 years;ago. The fair market value of Hart, Sr.'s partnership interest was $60,000 at;the time of the gift. Hart, Jr. sold the 25 percent interest for $85,000 on December;17. What type and amount of capital gain should Hart, Jr. report on his tax;return?;a.;Long-term capital gain of $25,000;b.;Short-term capital gain of $25,000;c.;Long-term capital gain of $35,000;d.;Short-term capital gain of $35,000;12.;Ralph Elin contributed a plot of land to the partnership of Anduz and Elin.;Elin's adjusted basis for 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 matched Elin's contribution;with a $75,000 cash contribution to the partnership. Thus, each partner's;capital account was credited with $75,000. Elin and Anduz share profits and;losses equally. What is the adjusted basis of Elin's interest in the;partnership?;a.;$25,000;b.;$37,500;c.;$50,000;d.;$75,000;13. On;July 1, Clark Cootes acquired a 20 percent interest in the partnership of Davis;Denny, by contributing a parcel of land for which his basis was $8,000.;At the date of the contribution, the land had a fair market value of $20,000;and was subject to a mortgage of $4,000. Responsibility for the mortgage was;assumed by the partnership. Assuming there are no other partnership;liabilities, the basis of Clark's interest in the partnership is;a.;$4,000;b.;$4,800;c.;$16,000;d.;$16,800;14.;For 20 years, Henry Humboldt has been a 25 percent partner in HIG, a calendar;year, cash basis partnership. This year, HIG averaged ordinary partnership;income of $20,000 each month. As of September 30, when Henry's adjusted basis;for his partnership interest, prior to consideration of the current year;operations, was $40,000, he sold his interest to George for $90,000. Henry;should include in his current year return as income from the partnership;a.;$70,000 long-term capital gain;b.;$50,000 long-term capital gain;c.;$20,000 long-term capital gain and $50,000 ordinary income;d.;$5,000 long-term capital gain and $45,000 ordinary income;e.;$70,000 ordinary income;15.;John Albin is a retired partner of Brill & Crum, a personal service;partnership. Albin has not rendered any services to Brill & Crum since his;retirement over 10 years ago. Under the provisions of Albin's retirement;agreement, Brill & Crum is obligated to pay Albin 10 percent of the;partnership's net income each year. In compliance with this agreement, Brill;Crum paid Albin $25,000 this year. How should Albin treat this $25,000?;a. Not;taxable;b.;Ordinary income;c.;Short-term capital gain;d.;Long-term capital gain;16. A;partnership has no Section 751 assets. Assuming that the partnership has a Code;Sec. 754 election in effect, the partnership would make all of the following;adjustments except;a.;Increase the basis of partnership property because of capital gain which a;distributee partner recognizes in a current distribution.;b.;Decrease the basis of partnership property because of capital loss which a;distributee partner recognizes in a liquidating distribution.;c.;Increase the basis of partnership property because the distributee partner's;basis for the partnership interest limits the basis assigned to partnership;property received in a current distribution.;d.;Decrease the basis of partnership property because the amount of the;distributee partner's basis assigned to partnership property distributed in a;liquidating distribution exceeds the partnership's pre-distribution basis in;the property.;e. Decrease;the basis of partnership property for the excess of the amount a purchasing;partner pays for a partnership interest over the partner's proportionate share;of the partnership's basis in its properties.;17.;Mark, Pete and Mickey are equal partners in the 2MP Partnership. At the;beginning of the year, Mark's basis in his partnership interest was $15,000;Pete's basis was $10,000, and Mickey's basis was $20,000. The partnership;reported taxable income of $30,000 (allocated equally among the partners). At;year-end, the partnership made a nonliquidating distribution of $25,000 cash to;Pete. How much income or gain will Pete recognize on receipt of the;distribution (assume the partnership has no hot assets)? Assume the partnership;has no liabilities.;a. zero;b.;$25,000;c.;$5,000;d.;$15,000;e.;none of the above;18.;Ellen is a 25 percent partner in Heartland Partners. Her tax basis in her;partnership interest is $18,000. She received a non-liquidating distribution of;land with a tax basis of $23,000 and a fair market value of $45,000. The;partnership has no liabilities. What will be Ellen's tax basis in the land;received in the non-liquidating distribution?;a.;$18,000;b.;$23,000;c.;$45,000;d. zero;e.;none of the above


Paper#45149 | Written in 18-Jul-2015

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