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tax problems - questin and answer,.,. ch 21




Question;16. LO.5 When can a partnership use the cash method of accounting?17. LO.3, 4, 5, 6, 7, 8 Skylark, lnc., a calendar year construction company, and Teal, Inc., a development corporation with a March 31 year-end, form the equal ST LLC on January 1 of the current year. Both members are C corporations. The LLC is formed to construct and lease shopping centers. Skylark contributes equipment (basis and fair market value of $800,000) and cash of $1.2 million. Teal contributes land (basis of $300,000, fair market value of $600,000) and cash of $1.4 million. The cash is used as follows:? Legal fees for drafting LLC?s operating agreement $ 10,000? Office expense (utilities, rent, overhead, etc.) 90,000? Materials and labor for construction of shopping center 2,500,000What issues must ST LLC address in preparing its initial tax return?18. LO.7 Penguin, LLP, owns a rental property and operates a consulting business. Each partner is active in the business and receives compensation from the LLP. The LLP invests its excess cash in government and corporate bonds, blue chip stocks, and a global mutual fund. It owns property that is subject to accelerated depreciation. What types of information must Penguin accumulate on its Schedule K?19. LO.8 What is the purpose of the three rules that implement the economic effect test? 20. LO.9, 10 Discuss the adjustments that must be made to a partner?s basis in the partnership interest. When are such adjustments made?21. LO.10 Describe, in general terms, how a partnership?s liabilities affect a partner?s basis in the partnership interest.22. LO.11 What is a partner?s capital account? Describe how a partner?s ending capital account balance is determined. In addition to the material in the chapter, refer toSchedule K?1 in Appendix B.23. LO.13 What is a guaranteed payment? How is it reported on Form 1065 and its various schedules? How is it reported to and by the partner?24. LO.13 When is partnership income subject to self-employment tax for an individual partner?25. LO.10, 12, 17 Discuss situations in which the partnership entity form might be more advantageous (or disadvantageous) than operating as a Subchapter C or S corporation.26. LO.14 ABC Partnership distributed cash and appreciated land to partner Bell in a proportionate nonliquidating distribution. What is the effect to Bell and ABC?27. LO.14 In a proportionate liquidating distribution in which the partnership also liquidates,ABC LLP distributes cash, inventory, and unrealized receivables. How does partner Angie determine her basis in the property she received? Might she recognize a gain or loss? Explain.28. LO.14 What is the effect on a partnership of a proportionate liquidating distribution of cash, appreciated land, and inventory where the partnership also liquidates? How does this compare to a liquidating distribution from a corporation?29. LO.15 Jody sells her partnership interest to Bill for $10,000. What issues must be addressed by Jody, Bill, and the partnership?


Paper#52759 | Written in 18-Jul-2015

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