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Question;1035. Questio;In a limited partnership, all partners are protected from debts of the;partnership.;a.;True;b. False;1036. Quest 2;A limited liability company offers all ?members? protection from claims by the;LLC?s creditors.;a.;True;b. False;1037. Quest 3;A limited liability limited partnership (LLLP) is a limited partnership (LP) in;which all partners, including the general partners, are protected from debts of;the partnership.;a.;True;b. False;1038. Quest 4;The governing document of a limited liability company (LLC) is a partnership;agreement which should spell out the partners? rights and obligations.;a.;True;b. False;1039. Quest 5;The taxable income of a partnership flows through to the partners, who report;the income on their tax returns.;a.;True;b. False;1040. Quest 6;The partnership reports each partner?s share of income to the partner in a;single amount on Form 1099.;a.;True;b. False;1041. Quest 7;On Form 1065, partners? capital accounts should be determined using the same;method on Schedule L, Schedule M-2, and the Schedules K-1 prepared for the;partners.;a.;True;b. False;1042. Quest 8;The amount of a partnership?s income and loss from operating activities is;combined with separately stated income and expenses in determining the;partnership?s net income (loss). This amount is reconciled to book income on;the partnership?s Schedule M-1 or Schedule M-3.;a.;True;b. False;1043. Quest 9;An example of the ?entity concept? underlying partnership taxation is the fact;that the partners (rather than the partnership) pay tax on partnership income.;a.;True;b. False;1044. Quest10;A partner has a profit-sharing percent, a loss-sharing percent, and a;capital-sharing ownership percent. Depending on the provisions in the;partnership agreement, these amounts may or may not be the same for a given;partner.;a.;True;b. False;1045. Quest11;The ?outside basis? is defined as a partner?s basis in the partnership;interest.;a.;True;b. False;1046. Quest12;Section 721 provides that no gain or loss is recognized on contribution of;property to a partnership in exchange for an interest in the partnership. A;disguised sale is an exception to nonrecognition of gain or loss under ? 721.;a.;True;b. False;1047. Quest13;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.;a.;True;b. False;1048. Quest14;Tyler and Travis formed the equal T&T Partnership during the current year;with Tyler contributing $300,000 in cash and Travis contributing land (basis of;$120,000, fair market value of $160,000) and inventory (basis of $30,000, fair;market value of $140,000). Travis recognizes no gain or loss on the;contribution and his basis in his partnership interest is $150,000.;a.;True;b. False;1049. Quest15;Justin and Kevin formed the equal JK Partnership during the current year, with;Justin contributing $60,000 in cash and Kevin contributing land (basis of;$40,000, fair market value of $30,000) and equipment (basis of $0, fair market;value of $30,000). Kevin recognizes a $20,000 gain on the contribution and his;basis in his partnership interest is $60,000.;a.;True;b. False;1050. Quest16;Julie owns property that is treated as a capital asset in her hands. She;contributed a parcel of land (basis $60,000, fair market value $58,000) to a;real estate partnership, which will hold it as inventory. After three years;the partnership sells the land for $56,000. The partnership will recognize a;$4,000 ordinary loss on sale of the property.;a.;True;b. False;1051. Quest17;If the partnership properly makes an election for treatment of a specific tax;item, the partner is bound by that treatment.;a.;True;b. False;1052. Quest18;JLK Partnership incurred $15,000 of organizational costs and $75,000 of startup;costs in 2011. JKL may deduct $5,000 each of organizational and startup costs;and the remaining costs ($10,000 of organizational costs and $70,000 of startup;costs) may be amortized over 180 months.;a.;True;b. False;1053. Quest19;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;1054. Quest20;Syndication costs arise when partnership interests are being marketed to;investors. These costs are amortized over 180 months.;a.;True;b. False;1055. Quest21;A partnership cannot use the cash method of accounting if one of the partners;is a C corporation.;a.;True;b. False;1056. Quest22;ABC, LLC is equally-owned by three corporations. Two corporations have June 30;fiscal year ends, the third is a calendar-year taxpayer. ABC will use a June 30;year end under the majority partners? tax year rule because more than 50% of;the partnership?s capital and profits is owned by partners with the same;taxable year.;a.;True;b. False;1057. Quest23;PaulCo, DavidCo, and Sean form a partnership with cash contributions of;$80,000, $50,000 and $30,000, respectively, and agree to share profits and;losses in the ratio of their original cash contributions. PaulCo uses a January;31 fiscal year-end, while DavidCo and Sean use a November 30 and December 31;year-end, respectively. The partnership must use the least aggregate deferral;method to determine its year end.;a.;True;b. False;1058. Quest24;A partnership must provide any information to the partners that the partners;would need to calculate deductions not permitted at the partnership level, such;as for oil and gas depletion or the corporate dividends received deduction.;a.;True;b. False;1059. Quest25;The JPM Partnership is a US-based manufacturing company. JPM calculates the;domestic production activities deduction (? 199) and deducts that amount on its;Form 1065.;a.;True;b. False;1060. Quest26;A partnership?s allocations of income and deductions to the partners are;required to be proportionate to the partners? percentage ownership of;partnership capital in order to meet the substantial economic effect tests.;a.;True;b. False;1061. Quest27;Tom and William are equal partners in the TW Partnership. Just before TW;liquidated, Tom?s capital account balance was $50,000 and William?s capital;account balance was $30,000. To meet the substantial economic effect;requirements, any liquidating cash distribution must be allocated equally;between the partners.;a.;True;b. False;1062. Quest28;Henry contributes property valued at $60,000 (basis $50,000) in exchange for a;25% interest in the HIKE Partnership. If the property is later sold for;$80,000, gain of $7,500 will be allocated to Henry.;a.;True;b. False;1063. Quest29;Ashley purchased her partnership interest from Lindsey on the first day of the;current year for $40,000 cash. She received a $10,000 cash distribution from;the partnership during the year, and her share of partnership income is;$15,000. If her share of partnership liabilities on the last day of the;partnership year is $20,000, her outside basis for her partnership interest at;the end of the year is $65,000.;a.;True;b. False;1064. Quest30;Emma?s basis in her BBDE LLC interest is $60,000 at the beginning of the tax;year. Her allocable share of LLC items are as follows: $20,000 of ordinary;income, $2,000 tax-exempt interest income, and a $6,000 long-term capital gain.;In addition, the LLC distributed $12,000 of cash to Emma during the year.;Assuming the LLC had no liabilities at the beginning or the end of the year;Emma?s ending basis in her LLC interest is $88,000.;a.;True;b. False;1065. Quest31;During the current year, John and Ashley form the JA Partnership and agree to;share profits and losses equally. Ashley contributes land with a fair market;value of $80,000 (subject to a $30,000 nonrecourse mortgage). On the;contribution date, Ashley?s adjusted basis in the land is $40,000. Immediately;after formation, Ashley?s partnership outside basis is $25,000.;a.;True;b. False;1066. Quest32;Julie and Kate form an equal partnership during the current year. Julie;contributes cash of $160,000, and Kate contributes property (adjusted basis of;$90,000, fair market value of $260,000) subject to a nonrecourse liability of;$100,000. As a result of these transactions, Kate has a basis in her;partnership interest of $40,000.;a.;True;b. False;1067. Quest33;The partnership must allocate nonrecourse debt among the partners according to;the ?constructive liquidation scenario.?;a.;True;b. False;1068. Quest34;Debt of a limited liability company is allocated among LLC members using the;nonrecourse debt allocation rules unless an LLC member has personally;guaranteed the debt.;a.;True;b. False;1069. Quest35;If a partnership allocates losses to the partners, the partners must first;apply the passive loss limitations, then the basis limitation, and finally the;at-risk limitations. If all three hurdles are met, the partner may deduct the;loss.;a.;True;b. False;1070. Quest36;Hardy?s basis in his partnership interest was $5,000 at the beginning of the;tax year. For the year, his share of the partnership?s loss was $6,000, and he;also received a distribution of $3,000. Hardy can deduct a $2,000 loss, and the;remaining $4,000 loss is suspended until a year in which he has adequate basis.;a.;True;b. False;1071. Quest37;Nicholas, a 1/3 partner with a basis in the interest of $80,000 at the;beginning of the year, received a guaranteed payment in the current year of;$50,000. Partnership income before consideration of the guaranteed payment was;$20,000. Nicholas must report a $10,000 ordinary loss from partnership;operations, and the $50,000 guaranteed payment as ordinary income.;a.;True;b. False;1072. Quest38;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.;a.;True;b. False;1073. Quest39;Maria owns a 60% interest in the KLM Partnership. Four years ago her father;gave her a parcel of land. The gift basis of the land to Maria is $60,000. In;the current year, Maria had still not figured out how to use the land for her;own personal or business use, consequently, she sold the land to the;partnership for $75,000. The partnership immediately started using the land as;a parking lot for its employees. Maria?s recognized gain of $15,000 on the sale;is capital?not ordinary.;a.;True;b. False;1074. Quest40;One of the disadvantages of the partnership form is that the partner?s share of;the partnership?s taxable income is taxed to the partner, regardless of whether;or not distributed.;a.;True;b. False


Paper#59233 | Written in 18-Jul-2015

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