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Question;1075. Quest41;Which of the following partnership owners is;personally liable for the entity?s debts to general creditors?;a.;A partner in a limited liability partnership.;b. A member of a limited liability;company.;c. A limited partner in a limited;partnership.;d. A general partner in a limited;partnership.;e. None of these owners are personally;liable for entity debts.;1076. Quest42;Which one of the following statements regarding partnership taxation is incorrect?;a.;A partnership is not a taxable entity for Federal income tax purposes.;b. Partnership income is comprised of;ordinary partnership income or loss and separately stated items.;c. A partnership is required to file a;return with the IRS.;d. A partner?s profit-sharing ratio;equals the partner?s loss-sharing ratio.;e. All of these statements are correct.;1077. Quest43;On a partnership?s Form 1065, which of the following statements is not true?;a.;The partnership reconciles its net income (including separately stated items);to book income on Schedule M-1 or M-3.;b. The partnership balance sheet on;Schedule L is generally presented on a financial (book) basis.;c. All partnership income and expense;items are reported on Form 1065, page 1.;d. The partnership?s equivalent of;taxable income is reported in the ?Analysis of Income (Loss).?;e. All of the above statements are true.;1078. Quest44;Which of the following is a correct;definition of a concept related to partnership taxation?;a.;The entity concept treats partners and partnerships as separate units and gives;the partnership its own tax ?personality.?;b. A partner?s capital sharing ratio is;defined as the percent of partnership profits that will be allocated to the;partner.;c. The partnership?s inside basis is;defined as the sum of each partner?s capital account balance.;d. A special allocation is defined as an;amount that could differently affect the tax liabilities of two or more;partners.;e. None of these statements is correct.;1079. Quest45;A partnership will take a carryover basis in an asset it acquires when;a.;The partnership acquires the asset through a ? 1031 like-kind exchange.;b. A partner owning 25% of partnership;capital and profits sells the asset to the partnership.;c. The partnership leases the asset from;a partner on a one-year lease.;d. The partnership acquires the asset;from a partner as a contribution to partnership capital under ? 721(a).;e. None of the above.;1080. Quest46;On January 1 of the current year, Jenna and Rob form an equal partnership.;Jenna makes a cash contribution of $80,000 and a property contribution;(adjusted basis of $120,000, fair market value of $160,000) in exchange for her;interest in the partnership. Rob contributes property (adjusted basis of;$190,000, fair market value of $240,000) in exchange for his partnership;interest. Which of the following statements is true concerning the income tax;results of this partnership formation?;a.;Jenna has a $200,000 tax basis for her partnership interest.;b. Rob recognizes a $50,000 gain on his;property transfer.;c. Rob has a $240,000 tax basis for his;partnership interest.;d. The partnership has a $160,000;adjusted basis in the property contributed by Jenna.;e. None of the statements is true.;1081. Quest47;Kevin, Cody, and Greg contributed assets to form the equal KCG Partnership.;Kevin contributed cash of $50,000 and land with a basis of $80,000 (fair market;value of $50,000). Cody contributed cash of $30,000 and land with a basis of;$40,000 (fair market value of $70,000). Greg contributed cash of $60,000 and a;fully depreciated property ($0 basis) valued at $40,000. Which of the following;tax treatments is not correct?;a.;Kevin?s basis in his partnership interest is $130,000.;b. Cody?s basis in his partnership;interest is $100,000.;c. Greg?s basis in his partnership;interest is $60,000.;d. KCG has a basis of $80,000, $40,000;and $0 in the land and property (excluding cash) contributed by Kevin, Cody;and Greg, respectively.;e. All of these statement are correct.;1082. Quest48;Tara and Robert formed the TR Partnership four years ago. Because they decided;the company needed some expertise in multimedia presentations, they offered;Katie a 1/3 interest in partnership capital and profits if she would come to;work for the partnership. On July 1 of the current year, the unrestricted;partnership interest (fair market value of $25,000) was transferred to Katie.;How should Katie treat the receipt of the partnership interest in the current;year?;a.;Nontaxable.;b. $25,000 ordinary income.;c. $25,000 short-term capital gain.;d. $25,000 long-term capital gain.;e. None of the above.;1083. Quest49;Partner Tom transferred property (basis of $20,000, fair market value of;$50,000) to the TUV Partnership in exchange for a partnership interest. At a;later date, when Tom's outside basis for his partnership interest was $70,000;Tom received a $50,000 cash distribution from the partnership. Which one of the;following statements is not true?;a.;If the cash distribution occurred two months after the property contribution;the IRS may treat the transaction as a disguised sale.;b. If the transaction is treated as a;disguised sale, Tom's basis in the partnership interest will be $20,000.;c. If Tom would have made the property;contribution anyway, even if he knew that the partnership would probably not;have any cash to distribute to him, the IRS would not likely contend the;transaction was a disguised sale.;d. If the IRS treated the transaction as;a disguised sale, the partnership's basis in the property would be $50,000.;1084. Quest50;In which of the following independent situations would the transaction most;likely be characterized as a disguised sale?;a.;Partner George contributes appreciated property to the GMVV Partnership, and;three years later GMVV distributes $100,000 proportionately to all the;partners.;b. Brianna contributes property with a;basis of $20,000 and a fair market value of $50,000 to the BGB Partnership in;exchange for a 20% interest therein. The partnership agrees to distribute;$20,000 to Brianna in fifteen months, if partnership cash flows from operations;exceed $100,000 at that time. The partnership does not expect to produce;operating cash flows of over $100,000 for at least five years.;c. Luis contributes appreciated property;to the BLP Partnership. Thirty months later, he receives a distribution from;the partnership of $15,000 cash. None of the other partners received a;distribution. There was no agreement that BLP would make the distribution, and;Luis would have made the contribution whether or not the partnership made the;distribution.;d. None of the above transactions will;be treated as a disguised sale.;e. a., b., and c. are all treated as;disguised sales.;1085. Quest51;When property is contributed to a partnership for a capital and profits;interest, the holding period of the contributing partner?s interest;a.;Always starts the day after the contribution date.;b. Always starts the day the property;was contributed.;c. May include the holding period of the;contributed property.;d. Never includes the holding period of;the contributed property.;e. None of the above.;1086. Quest52;Lexi and Allie formed a partnership. Lexi received a 30% interest in;partnership capital and profits in exchange for land with a basis of $50,000;and a fair market value of $90,000. Allie received a 70% interest in;partnership capital and profits in exchange for $210,000 of cash. Three years;after the contribution date, the land contributed by Lexi is sold by the;partnership to a third party for $120,000. How much taxable gain will Lexi;recognize from the sale?;a.;$21,000.;b. $40,000.;c. $49,000.;d. $70,000.;e. None of the above.;1087. Quest53;Which of the following is an election or calculation made by the partner rather;than the partnership?;a.;Whether to claim a tax credit or deduction for foreign taxes.;b. Whether to capitalize, amortize, or;expense research and experimental costs.;c. The taxable year of the partnership.;d. The depreciation method used for;partnership property.;e. All of the above elections are made;by the partnership.;1088. Quest54;TEC Partners was formed during the current tax year. It incurred $10,000 of;organizational expenses, $80,000 of startup expenses, $200,000 of syndication;costs, and $5,000 of transfer taxes to retitle property contributioned by a;partner. Which of the following statements is correct regarding these payments?;a.;TEC may deduct $5,000 of the syndication costs, the remaining amount must be;amortized.;b. TEC must amortize the $10,000 of;organizational expenses over 180 months.;c. TEC?s startup expenses are amortized;over 60 months.;d. TEC must add the transfer tax to the;basis of the contributed property.;e. None of the above statements are;true.;1089. Quest55;Which of the following statements is;always correct regarding assets acquired by a newly formed partnership? If;a partner contributes;a.;Depreciable property: the partnership treats the property as newly acquired;depreciable property, and may claim a ? 179 deduction.;b. Unrealized (cash-basis) receivables;the partnership will report a capital gain when the receivable is collected.;c. Inventory (in the partner?s hands);the partnership reports ordinary income if the property is held as a capital;asset and sold within five years of the contribution date.;d. Land valued at less than its basis;the partnership reports a ? 1231 loss if the property is sold at a loss.;e. None of these statements is correct.;1090. Quest56;Which of the following statements is true regarding accounting methods;available to a partnership?;a.;If a partnership is a tax shelter, it cannot use the accrual method of;accounting.;b. If a partnership has a personal;service corporation as a partner, it cannot use the cash method.;c. If a partnership has a partner that;is a C corporation, it cannot use the cash method.;d. If a partnership has a partner that;is a C corporation, it must use the cash method.;e. All of the above statements are;false.;1091. Quest57;Fern, Inc., Ivy Inc., and Jason formed a general partnership. Fern owns a 50%;interest and Ivy and Jason each own 25% interests. Fern, Inc. files its tax;return on a July 1 - June 30 fiscal year, Ivy Inc. files on a September 1 -;August 31 fiscal year, and Jason is a calendar year taxpayer. Which of the following;statements is true regarding the taxable year the partnership can choose?;a.;The partnership must choose the calendar year because it has no principal;partners.;b. The partnership must choose a June 30;year-end because Fern, Inc. is a majority partner.;c. The partnership can request;permission from the IRS to use a January 31 fiscal year if it can establish;that is a natural business year.;d. The partnership cannot use the ?least;aggregate deferral? method to determine its taxable year.;e. None of the above.;1092. Quest58;Erika contributed property with a basis of $30,000 and a value of $40,000 to;the BE Partnership in exchange for a 40% interest in partnership capital and;profits. During the first year of partnership operations, BE had net taxable;income of $60,000. The partnership distributed $10,000 cash to Erika. Erika?s;adjusted basis (outside basis) for her partnership interest at year-end is;a.;$24,000.;b. $30,000.;c. $44,000.;d. $54,000.;e. None of the above.;1093. Quest59;In the current year, the POD Partnership received revenues of $200,000 and paid;the following amounts: $50,000 in rent and utilities, and $20,000 as a;distribution to partner Olivia. In addition, the partnership earned $6,000 of;long-term capital gains during the year. Partner Donald owns a 50% interest in;the partnership. How much income must Donald report for the tax year?;a.;$68,000 ordinary income.;b. $78,000 ordinary income.;c. $65,000 ordinary income, $3,000 of;long-term capital gains.;d. $75,000 ordinary income, $3,000 of;long-term capital gains.;e. None of the above.;1094. Quest60;Kaylyn is a 40% partner in the KKM Partnership. During the current year, KKM;reported gross receipts of $160,000 and a charitable contribution of $10,000.;The partnership paid office expenses of $100,000. In addition, KKM distributed;$10,000 each to partners Kaylyn and Kristie, and the partnership paid partner;Megan $20,000 for administrative services. Kaylyn reports the following income;from KKM during the current tax year;a.;$16,000 ordinary income, $4,000 charitable contribution.;b. $8,000 ordinary income, $4,000;charitable contribution.;c. $4,000 ordinary income.;d. $12,000 ordinary income.;e. None of the above.;1095. Quest61;Rick is a 30% partner in the ROC Partnership. At the beginning of the tax year;Rick?s basis in the partnership interest was $60,000, including his share of;partnership liabilities. During the current year, ROC reported net ordinary;income of $40,000. In addition, ROC distributed $5,000 to each of the partners;($15,000 total). At the end of the year, Rick?s share of partnership;liabilities increased by $20,000. Rick?s basis in the partnership interest at;the end of the year is;a.;$120,000.;b. $87,000.;c. $75,000.;d. $60,000.;e. None of the above.;1096. Quest62;Marissa is a 50% partner in the BAM Partnership. At the beginning of the tax;year, Marissa?s basis in the partnership interest was $200,000, including her;share of partnership liabilities. During the current year, BAM reported an;ordinary loss of $100,000. In addition, BAM distributed $10,000 to Marissa and;paid partner Brian a $20,000 consulting fee (neither of these amounts was;deducted in determining the $100,000 loss from operations). At the end of the year;Marissa?s share of partnership liabilities decreased by $30,000. Assuming loss;limitation rules do not apply, Marissa?s basis in the partnership interest at;the end of the year is;a.;$135,000.;b. $100,000.;c. $95,000.;d. $90,000.;e. None of the above.;1097. Quest63;BCD Partners reported the following items on the partnership?s Schedule K;ordinary income, $72,000, interest income, $5,000, long-term capital gain;$8,000, charitable contributions, $3,000, post-1986 depreciation adjustment;$4,000, and cash distributions to partners, $20,000. How much will BCD show as;net income (loss) on its Analysis of Income (Loss)?;a.;$58,000.;b. $72,000.;c. $78,000.;d. $82,000.;e. $85,000.;1098. Quest64;At the beginning of the year, Heather?s ?tax basis? capital account balance in;the HEP Partnership was $60,000. During the tax year, Heather contributed;property with a basis of $10,000 and a fair market value of $30,000. Her share;of the partnership?s ordinary income and separately stated income and deduction;items was $26,000. At the end of the year, the partnership distributed $10,000;of cash to Heather. Also, the partnership allocated $15,000 of recourse debt;and $25,000 of nonrecourse debt to Heather. What is Heather?s ending capital;account balance determined using the ?tax basis? method?;a.;$86,000.;b. $96,000.;c. $101,000.;d. $126,000.;e. $136,000.;1099. Quest65;Which of the following statements is not;a requirement of the substantial economic effect test?;a.;Income, gains, losses, and deductions must be allocated to the partners in;accordance with their capital contributions.;b. An allocation of income must increase;the partner?s capital account balance, and an allocation of deduction must;decrease the partner?s capital account balance.;c. A partner with a negative capital;account balance must ?restore? that capital account, generally by contributing;cash to the partnership.;d. On liquidation of the partner?s;interest in the partnership, the partner must receive assets that have a fair;market value equal to that partner?s (positive) capital account balance.;e. All of the above statements are;requirements of the substantial economic effect test.;1100. Quest66;Brooke and John formed a partnership. Brooke received a 40% interest in;partnership capital and profits in exchange for contributing land (basis of;$30,000 and fair market value of $120,000). John received a 60% interest in;partnership capital and profits in exchange for contributing $180,000 of cash.;Three years after the contribution date, the land contributed by Brooke is sold;by the partnership to a third party for $150,000. How much taxable gain will;Brooke recognize from the sale?;a.;$102,000.;b. $90,000.;c. $48,000.;d. $36,000.;e. $0.;1101. Quest67;Michelle and Jacob formed the MJ Partnership. Michelle contributed $20,000 of;cash in exchange for her 50% interest in the partnership capital and profits.;During the first year of partnership operations, the following events occurred;the partnership had a net taxable income of $10,000, Michelle received a;distribution of $8,000 cash from the partnership, and Michelle had a 50% share;in the partnership?s $16,000 of recourse liabilities on the last day of the;partnership year. Michelle?s adjusted basis for her partnership interest at;year end is;a.;$17,000.;b. $20,000.;c. $25,000.;d. $33,000.;e. $38,000.1102. CHAPTER;10?PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest68;Which of the following statements is correct regarding the manner in which;partnership liabilities are reflected in the partners? bases in their;partnership interests?a.;Nonrecourse debt is allocated to the partners according to their loss-sharing;ratios.;b. Recourse debt is allocated to the;partners to the extent of the partnership?s minimum gain in the property.;c. An increase in partnership debts;results in a decrease in the partners? bases in the partnership interest.;d. A decrease in partnership debt is;treated as a distribution from the partnership to the partner and reduces the;partner?s basis in the partnership interest.;e. Partnership debt is not reflected in;the partners? bases in their partnership interests.1103. CHAPTER;10?PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest69;Alicia and Barry form the AB Partnership at the start of the current year with;a land contribution by Barry and a cash contribution by Alicia. Barry?s;contributed property is subject to a recourse mortgage assumed by the;partnership. Barry has an 80% interest in AB?s profits and losses. The land has;been held by Barry for the past 6 years as an investment. It will be used by AB;as an operating asset in its parking lot business. Which of the following;statements is correct?a.;Immediately after formation, Alicia?s basis in the partnership equals the cash;contributed by Alicia.;b. Immediately after formation, Alicia?s;basis in the partnership equals the cash she contributed plus her share of the;recourse debt contributed by Barry.;c. Since the debt is recourse, the;constructive liquidation scenario is not applicable for determining the;allocation of debt to the partners.;d. AB?s basis in the land contributed by;Barry equals Barry?s basis in the land immediately before the contribution;date, less the amount of the recourse debt assumed by the partnership.;e. None of the above.1104. CHAPTER;10?PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest70;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:a.;$16,000.;b. $18,000.;c. $45,000.;d. $80,000.;e. $90,000.1105. CHAPTER;10?PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest71;During the current tax year, Jordan and Whitney each contributed $50,000 to;form the J&W LLC. Each member has a 50% interest in LLC capital, profits;and losses, except that depreciation expense is allocated 40% to Jordan and 60%;to Whitney. During the first year, the LLC reported income (before depreciation;expense) of $20,000 and had depreciation expense of $10,000. The LLC incurred;recourse debt (that was personally guaranteed by both of the LLC members) of;$60,000. Partnership assets are $170,000 at the end of the year. Under the;constructive liquidation scenario, how is the recourse debt allocated to Jordan;and Whitney?a.;All recourse debt is allocated to Whitney because she has the highest;percentage allocation of depreciation expense.;b. The recourse debt is shared equally;($30,000 each) by Jordan and Whitney.;c. The recourse debt is allocated;$36,000 to Whitney and $24,000 to Jordan.;d. The recourse debt is allocated;$31,000 to Whitney and $29,000 to Jordan.;e. The recourse debt is not allocated to;the LLC members.1106. CHAPTER;10?PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest72;Which of the following is not an;adjustment to the partners? basis in the partnership interest?a.;Increased by contributions the partner made to the partnership.;b. Decreased by the amount of guaranteed;payments the partner received from the partnership.;c. Increased by the partner?s share of;tax-exempt income.;d. Decreased by any decrease in the;partner?s share of partnership liabilities.;e. Increased by the partner?s share of;separately stated income items.1107. CHAPTER;10?PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest73;Rebecca is a partner in the RST Partnership, which is not publicly traded. Her;allocable share of RST?s passive ordinary losses from a nonrealty activity for;the current year is ($60,000). Rebecca has a $40,000 adjusted basis (outside;basis) for her interest in RST (before deduction of any of the passive losses).;Her amount ?at risk? under ? 465 is $30,000 (before deduction of any of the;passive losses). She also has $25,000 of passive income from other sources. How;much of her ($60,000) allocable loss can Rebecca deduct on her current year?s;tax return?a.;$25,000.;b. $30,000.;c. $40,000.;d. $60,000.;e. None of the above.1108. CHAPTER;10?PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest74;At the beginning of the tax year, Zach?s basis for his partnership interest and;his amount at risk in the partnership was $30,000. His share of partnership;items for the year consisted of tax-exempt interest income of $2,000 and an;ordinary loss of $44,000. He also received a distribution from the partnership;of $20,000 cash during the year. For the tax year, Zach will report:a.;A nontaxable distribution of $20,000, an ordinary loss of $10,000, and a;suspended loss carryforward of $34,000.;b. An ordinary loss of $32,000, a;suspended loss carryforward of $12,000, and a taxable distribution of $20,000.;c. A nontaxable distribution of $20,000;an ordinary loss of $12,000, and a suspended loss carryforward of $32,000.;d. An ordinary loss of $44,000 and a;nontaxable distribution of $20,000.1109. CHAPTER;10?PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest75;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?a.;$80,000.;b. $75,000.;c. $70,000.;d. $60,000.;e. $0.1110. CHAPTER;10?PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest76;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:a.;$0 gain or loss.;b. $37,500 ordinary income.;c. $37,500 capital gain.;d. $50,000 ordinary income.;e. $50,000 capital gain.1111. CHAPTER;10?PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest77;Molly is a 40% partner in the MAP Partnership. During the current tax year, the;partnership reported ordinary income of $210,000 before payment of guaranteed;payments and distributions to partners. The partnership made an ordinary cash;distribution of $30,000 to Molly, and paid guaranteed payments to partners;Molly, Amber, and Pat of $30,000 each ($90,000 total). How much will Molly?s;adjusted gross income increase as a result of the above items?a.;$88,000.;b. $78,000.;c. $66,000.;d. $36,000.;e. None of the above.1112. CHAPTER;10?PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest78;Stephanie is a calendar year cash basis taxpayer. She owns a 50% profit and;loss interest in a cash basis partnership with a September 30 year-end. The;partnership?s operating income (after deducting guaranteed payments) was;$120,000 ($10,000 per month) and $144,000 ($12,000 per month), respectively;for the partnership tax years ended September 30, 2011 and 2012. The;partnership paid guaranteed payments to Stephanie of $2,000 and $3,000 per;month during the fiscal years ended September 30, 2011 and 2012. How much will;Stephanie?s adjusted gross income be increased by these partnership items for her;tax year ended December 31, 2011?a.;$60,000.;b. $72,000.;c. $84,000.;d. $90,000.;e. $108,000.1113. CHAPTER;10?PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest79;Joseph is the managing general partner of JKL, in which he owns a 40% interest.;For the year, JKL reported income of $300,000 (after deducting all guaranteed;payments). Joseph received a guaranteed payment of $20,000 for capital that he;had loaned the partnership, and he received a guaranteed payment of $100,000;for services he performed for JKL. How much income from self-employment did;Joseph earn from JKL?a.;$20,000.;b. $100,000.;c. $120,000.;d. $220,000.;e. $240,000.;="normal">


Paper#59234 | Written in 18-Jul-2015

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