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Question;1205.,70;The December 31, 2011, balance sheet of the RST General Partnership reads as;follows.;Basis;FMV;Cash;$ 65,000;$ 65,000;Receivables;?0?;7,500;Capital and ? 1231 assets;55,000;100,000;Total;$120,000;$172,500;Roy, capital;$ 40,000;$ 57,500;Sue, capital;40,000;57,500;Ted, capital;40,000;57,500;Total;$120,000;$172,500;The partners share equally in partnership capital, income, gain, loss;deduction and credit. Ted?s adjusted basis for his partnership interest is;$40,000. On December 31, 2011, he retires from the partnership, receiving a;$60,000 cash payment in liquidation of his interest. The partnership agreement;states that $2,500 of the payment is for goodwill. Which of the following;statements about this distribution is false?;a.;If capital is NOT a material income-producing factor to the partnership, the;736(a) payment will be $2,500.;b. If capital IS a material;income-producing factor, the entire $60,000 payment will be a ? 736(b) property;payment.;c. The payment for Ted?s share of;goodwill will create $2,500 of ordinary income to him.;d. The partnership can deduct any amount;that is a ? 736(a) payment because it will be determined without regard to;partnership profits.;e. All statements are false.;1206.,71;Which of the following statements is true;regarding the sale of a partnership interest?;a.;The selling partner?s share of partnership liabilities is disregarded in;determining the gain or loss on the sale of a partnership interest.;b. For purposes of computing the selling;partner?s gain or loss, the partner?s basis in the partnership interest is;determined as of the last day of the partnership tax year ending before the;year in which the interest is sold.;c. No reporting is required if a partner;sells an interest in a partnership.;d. The selling partner could be required;to report both ordinary income and a capital loss on sale of the partnership;interest.;e. The partner?s share of partnership;?hot assets? is disregarded in determining the character of the partner?s gain;on the sale of the partnership interest.;1207.,72;Nicholas is a 25% owner in the DDBN LLC (a calendar year entity). At the end of;the last tax year, Nicholas?s basis in his interest was $50,000, including his;$20,000 share of LLC liabilities. On July 1 of the current tax year, Nicholas;sells his LLC interest to Anna for $80,000 cash. In addition, Anna assumes;Nicholas?s share of LLC liabilities, which, at that date, was $15,000. During;the current tax year, DDBN?s taxable income is $120,000 (earned evenly during;the year). Nicholas?s share of the LLC?s unrealized receivables is valued at;$6,000 ($0 basis). At the sale date, what is Nicholas?s basis in his LLC;interest, how much gain or loss must he recognize, and what is the character of;the gain or loss?;a.;$45,000 basis, $6,000 ordinary income, $44,000 capital gain.;b. $60,000 basis, $6,000 ordinary;income, $29,000 capital gain.;c. $60,000 basis, $35,000 capital gain.;d. $75,000 basis, $0 ordinary income;$20,000 capital gain.;e. $75,000 basis, $6,000 ordinary;income, $14,000 capital gain.;1208.,73;James, Justin, and Joseph are equal partners in the JJJ Partnership. The;partnership balance sheet reads as follows on December 31 of the current year;Basis;FMV;Cash;$ 60,000;$ 60,000;Unrealized receivables;?0?;45,000;Land;75,000;90,000;Total;$135,000;$195,000;James, capital;$ 45,000;$ 65,000;Justin, capital;45,000;65,000;Joseph, capital;45,000;65,000;Total;$135,000;$195,000;Partner Joseph has an adjusted basis of $45,000 for his partnership interest.;If Joseph sells his entire partnership interest to new partner Kayla for;$65,000 cash, how much capital gain and ordinary income must Joseph recognize;from the sale?;a.;$20,000 ordinary income.;b. $20,000 capital gain.;c. $15,000 ordinary income, $5,000;capital gain.;d. $45,000 ordinary income, $25,000;capital loss.;e. None of the above.;1209.,74;Tina sells her 1/3 interest in the TAX Partnership to James for $60,000 cash;plus the assumption of Tina?s $4,000 share of partnership debt. On the sale;date, the partnership balance sheet and agreed-upon fair market values were as;follows;Basis;FMV;Cash;$30,000;$ 30,000;Receivables;?0?;42,000;Land;60,000;120,000;Total;$90,000;$192,000;Notes payable;$12,000;$ 12,000;Tina, capital;26,000;60,000;Ariel, capital;26,000;60,000;Xena, capital;26,000;60,000;Total;$90,000;$192,000;As a result of the sale, Tina recognizes;a.;No gain or loss.;b. $34,000 capital gain.;c. $38,000 capital gain.;d. $14,000 ordinary income and $20,000;capital gain.;e. $14,000 capital gain and $24,000;ordinary income.;1210.,75;Which of the following statements about the transfer of a partnership interest;is not true?;a.;The seller?s adjusted basis for the partnership interest is increased by the;seller?s share of undistributed partnership income (or reduced by partnership;loss) for the portion of the partnership?s taxable year ending on the date of;the sale.;b. The partnership taxable year;generally does not close with respect to a partner who transfers a partnership;interest at death.;c. The amount realized on the sale of a;partnership interest is the sum of any money and the fair market value of any;property received for the interest, plus the selling partner?s share of;partnership liabilities under ? 752.;d. With respect to a transfer of a;partnership interest by gift, all partnership gain, loss, credit, etc., items;are allocated between the donor and the donee.;e. All of the above are true statements.;1211.,76;Brittany, Jennifer, and Daniel are equal partners in the BJD Partnership. The;partnership balance sheet reads as follows on December 31 of the current year.;Basis;FMV;Cash;$ 75,000;$ 75,000;Unrealized receivables;?0?;51,000;Land;45,000;63,000;Total;$120,000;$189,000;Brittany, capital;$ 40,000;$ 63,000;Jennifer, capital;40,000;63,000;Daniel, capital;40,000;63,000;Total;$120,000;$189,000;Partner Daniel has an adjusted basis of $40,000 for his partnership interest.;If Daniel sells his entire partnership interest to new partner Amber for;$73,000 cash, how much can the partnership step-up the basis of Amber?s share;of partnership assets under ?? 754 and 743(b)?;a.;$6,000.;b. $18,000.;c. $23,000.;d. $33,000.;e. None of the above.;1212.,77;Partner Jordan received a distribution of $80,000 cash from the JKL Partnership;in complete liquidation of his partnership interest. If Jordan?s outside basis;immediately before the distribution was $90,000, and if the partnership has;made (and not revoked) a ? 754 election in a prior year, which of the following;statements is true? (Assume the partnership owns no ?hot assets.?);a.;The partnership will step-down the basis of its assets by $10,000.;b. The partnership will step-up the;basis of its assets by $10,000.;c. Jordan will recognize $10,000 of;ordinary loss on the distribution.;d. Jordan will recognize a $10,000;capital loss on the distribution.;e. Both a. and d. are true.;1213.,78;The RST Partnership makes a proportionate distribution of its assets to Ryan;in complete liquidation of his partnership interest. The distribution consists;of $40,000 in cash and capital assets with a basis to the partnership of;$30,000 and a fair market value of $48,000. None of the payment is for;partnership goodwill. At the time of the distribution, Ryan?s partnership basis;is $45,000 and the partnership has no liabilities and no ?hot assets.? If the;partnership makes an optional basis adjustment election on a timely filed;return, it recognizes;a.;Capital gain of $25,000 and increases the basis of its remaining assets by;$12,500.;b. Capital loss of $5,000 and decreases;the basis of its remaining assets by $5,000.;c. No gain or loss and increases the;basis of its remaining assets by $25,000.;d. No gain or loss and decreases the;basis of its remaining assets by $58,000.;e. None of the above.;1214.,79;Cynthia sells her 1/3 interest in the CAR Partnership to Brandon for $80,000;cash. Brandon also assumed Cynthia?s 1/3 share of partnership liabilities. On;the date of sale, the partnership balance sheet and agreed-upon fair market;values were as follows;Basis;FMV;Cash;$ 55,000;$ 55,000;Receivables;?0?;60,000;Land;50,000;125,000;Total;$105,000;$240,000;Recourse liabilities;$ 15,000;$ 15,000;Cynthia, capital;30,000;75,000;Arnold, capital;30,000;75,000;Ralph, capital;30,000;75,000;Total;$105,000;$240,000;If the partnership has a ? 754 election in effect, the total ?step-up? in basis;that Brandon can take in the partnership assets is;a.;$85,000.;b. $55,000.;c. $50,000.;d. $45,000.;e. $20,000.;1215.,80;A partnership may make an optional election to adjust the basis of its property;on a distribution to a partner which liquidates the partner?s entire interest;in the partnership. If such an election is in effect, the partnership;a.;Generally applies the election to transfers that take place at any later date;unless the election is revoked.;b. Only adjusts the basis of its;property for differences in basis between that of the partnership and a;distributee partner if a transferor-transferee situation arises within two;years after the distribution.;c. Increases the basis of similar;retained assets when a distributee partner takes a basis which is greater than;the partnership?s basis in these assets, assuming the partnership does not have;any receivables or inventory.;d. Decreases the basis of similar;retained assets when a distributee partner takes a basis for the distributed;assets which is less than the partnership?s basis in these assets.;e. All of the above.;1216.,81;Which of the following transactions will not;result in termination of a partnership for Federal tax purposes?;a.;The partnership is incorporated.;b. A 70% interest in partnership capital;and profits is sold to a third party purchaser.;c. Cash is distributed in liquidation of;a 60% partner?s interest in a five-partner partnership.;d. A 40% interest in partnership capital;and profits is sold to the other partner in a two-partner partnership.;e. None of the above.;1217.,82;On December 31 of last year, Rachel gave her daughter, Courtney, a gift of a;25% interest in a partnership in which capital is a material income-producing;factor. For the current calendar year, the partnership?s ordinary income was;$200,000. Rachel and Courtney were the only partners, and there were no;guaranteed payments. Rachel?s services performed for the partnership were worth;$40,000, and Courtney has never performed any services. What is Courtney?s;distributive share of partnership income for the current year?;a.;$100,000.;b. $80,000.;c. $50,000.;d. $40,000.;e. None of the above.;1218.,83;Which of the following statements, if any, about an LLC is false?;a.;An LLC is usually taxed like a partnership.;b. ?Members? of an LLC generally have;limited personal liability for debts of the LLC, except for the managing member;who has unlimited liability for LLC debts.;c. ?Members? of an LLC can participate;in management of the LLC unless the member agrees not to participate.;d. An LLC can specially allocate income;items, as long as the substantial economic effect rules of ? 704(b) are;followed.;e. None of the above statements is;false.;1219.,84;Which of the following is nottrue;regarding a limited liability company?;a.;The Code does not specifically provide for the taxation of limited liability;companies. Therefore, an LLC that is taxed as a partnership must rely primarily;on the tax provisions that apply to partnerships.;b. An LLC is effectively treated as a;limited partnership with no limited partners.;c. An LLC offers several advantages over;the S corporation, including not making the managing member of the LLC liable;for self-employment taxes on his or her share of LLC income.;d. In general, an LLC member is not;personally liable for LLC debts.;e. Any member of an LLC can participate;in the management of the LLC if the operating agreement so permits.;1220.,85 Match the following statements with the;best match from the choices below. Note: Choice L may be used more than once.Nonliquidating;distributionRecaptured receivablesInventoryUnrealized receivableDepreciation;recaptureDisproportionate distributionLiquidating distributionNonqualified;distributionOrdering rulesHot assetsSubstantially appreciated inventoryOptional;adjustment electionDoes not eliminate the partner?s interest in the;partnership. No correct match provided. Any partnership assets other than cash;capital, or ? 1231 assets. Cash basis accounts receivable, for example. An;unrealized receivable. Changes the partner?s or the partnership?s ordinary;income potential. Terminates the partner?s interest in the partnership. No;correct match provided. Cash, then inventory and unrealized receivables, then;other assets. Ordinary income-producing items. Fair market value exceeds 120%;of basis. Inside basis of partnership property can be adjusted to reflect the;purchase price paid. A distribution of all partnership hot assets.;[a] 1. Nonliquidating distribution;[b] 2. Recaptured receivables;[c] 3. Inventory;[d] 4. Unrealized receivable;[e] 5. Depreciation recapture;[f] 6. Disproportionate;distribution;[g] 7. Liquidating;distribution;[h] 8. Nonqualified;distribution;[i] 9. Ordering rules;[j] 10. Hot assets;[k] 11. Substantially;appreciated inventory;[l] 12. Optional adjustment;election;with the best match from the choices;below. Note: Choice M may be used more than once.Unstated goodwillStated goodwillCapital;intensive partnershipService providing partnershipSales price of partnership;interestLimited partnerGeneral partnerSection 754Mandatory step downStep upStep;downLimited liability partnershipTechnical terminationMay be a ? 736(a);payment. A ? 736(b) payment. Liquidation payments from this type of partnership;are always ? 736(b) payments. Liquidation payments from this type of;partnership may include ? 736(a) payments. Includes the partner?s share of;partnership liabilities. No correct match is provided. May receive ? 736(a);payments. Adjustment designed to bring inside and outside bases into balance.;Partnership asset basis is at least $250,000 > FMV. Could arise if a;distribution results in gain to the distributee partner. Could result from sale;of a partnership interest for less than the partner?s share of the inside basis;of assets. No correct match is provided. Sale of more than 50% in less than 12;months. Would result if the partner contributes appreciated property to the;partnership.;[a] 1. Unstated goodwill;[b] 2. Stated goodwill;[c] 3. Capital intensive;partnership;[d] 4. Service providing;partnership;[e] 5. Sales price of;partnership interest;[f] 6. Limited partner;[g] 7. General partner;[h] 8. Section 754;[i] 9. Mandatory step down;[j] 10. Step up;[k] 11. Step down;[l] 12. Limited liability;partnership;[m] 13. Technical termination;1222.,87 Match the following independent;distribution payments in liquidation of a partner?s interest in an ongoing;partnership with the statements below.Payment to a limited partner for $10,000 of goodwill, where goodwill is not provided for in the partnership;agreement.Payment to a general;partner for $10,000 of goodwill, where goodwill is provided for in the partnership agreement, and the partnership;derives most of its income from services.Payment of $25,000 cash for a;partner?s share of substantially appreciated inventory.Payment of $60,000 cash;for a partner?s share of unrealized receivables where the partner is a general;partner, and most of the partnership?s income is derived from services.Payment;of $60,000 cash for a partner?s share of unrealized receivables where the;partner is a limited partner, and most of the partnership?s income is derived from;services.Payment of an annuity to a retiring general partner in a service;oriented partnership of 5% of partnership profits each year for the five years;following the partner?s retirement.Payment of $100,000 cash, representing the;partner?s share of the value of partnership equipment which has a potential;depreciation recapture of $25,000.A payment for the partner?s share of;partnership property under ? 736(b). A payment for the partner?s share of;partnership property under ? 736(b). A payment for the partner?s share of;partnership property under ? 736(b). A payment for the partner?s share of;partnership income under ? 736(a). A payment for the partner?s share of;partnership property under ? 736(b). A payment for the partner?s share of;partnership income under ? 736(a). A payment for the partner?s share of;partnership property under ? 736(b). The payment includes both a ? 736(a) and a;? 736(b) element.;[a] 1. Payment to a limited partner for $10,000 of goodwill;where goodwill is not provided for in;the partnership agreement.;[b] 2. Payment to a general partner for $10,000 of goodwill;where goodwill is provided for in the;partnership agreement, and the partnership derives most of its income from;services.;[c] 3. Payment of $25,000 cash;for a partner?s share of substantially appreciated inventory.;[d] 4. Payment of $60,000 cash;for a partner?s share of unrealized receivables where the partner is a general;partner, and most of the partnership?s income is derived from services.;[e] 5. Payment of $60,000 cash;for a partner?s share of unrealized receivables where the partner is a limited;partner, and most of the partnership?s income is derived from services.;[f] 6. Payment of an annuity;to a retiring general partner in a service oriented partnership of 5% of;partnership profits each year for the five years following the partner?s;retirement.;[g] 7. Payment of $100,000;cash, representing the partner?s share of the value of partnership equipment;which has a potential depreciation recapture of $25,000.

 

Paper#59277 | Written in 18-Jul-2015

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