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Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Pursuant to a complete liquidation, Oriole Corporation distributes to its shareholders land with a basis of $450,000 and a fair market value of $550,000. The land is subject to a liability of $600,000. What is Oriole?s recognized gain or loss on the distribution? a. $0. b. $100,000 gain. c. $150,000 gain. d. $50,000 loss. e. None of the above. ____ 2. The stock in Black Corporation is owned entirely by Nancy (80%) and Wanda (20%), mother and daughter. Three years ago, Nancy contributed land (basis of $200,000, fair market value of $250,000) to Black Corporation in a transaction that qualified under ? 351. In the current year and pursuant to a complete liquidation of Black, the land is distributed proportionately to Nancy and Wanda. At the time of the liquidating distribution, the land had a fair market value of $100,000. What amount of loss will Black Corporation recognize on the distribution of the land? a. $20,000. b. $80,000. c. $100,000. d. $150,000. e. None of the above. ____ 3. During the current year, Ecru Corporation is liquidated and distributes its only asset, land, to Kena, the sole shareholder. On the date of distribution, the land has a basis of $300,000, a fair market value of $650,000, and is subject to a liability of $400,000. Kena, who takes the land subject to the liability, has a basis of $75,000 in the Ecru stock. With respect to the distribution of the land, which of the following statements is correct? a. Ecru Corporation recognizes a gain of $100,000. b. Kena has a basis of $250,000 in the land. c. Kena recognizes a gain of $175,000. d. Kena has a basis of $300,000 in the land. e. Kena recognizes a gain of $575,000. ____ 4. Three years ago, Loon Corporation purchased 100% of the stock of Pelican Corporation for $950,000. Currently, Pelican Corporation has assets with a basis of $700,000 and a fair market value of $1.2 million. If Loon liquidates Pelican, what basis will Loon have in the assets it acquires from Pelican Corporation? a. $0. b. $700,000. c. $950,000. d. $1.2 million. e. None of the above. 5. Jupiter Corporation acquires all of Titian Corporation?s stock in exchange for its voting stock. Iris received 1,000 shares of Jupiter valued at $50,000 for her 8,000 shares of Titian that cost Iris $100,000 five years ago. In addition to the Jupiter stock, she receives a $30,000 bond. How does Iris treat this transaction for tax purposes? a. Iris recognizes a loss of $50,000. Her Jupiter stock basis is $50,000. b. Iris recognizes a loss of $20,000. Her Jupiter stock basis is $80,000. c. Iris recognizes a $20,000 loss and a $25,000 gain. Her Jupiter stock basis is $105,000. d. Iris realizes a $20,000 loss that is not recognized. Her Jupiter stock basis is $120,000. e. None of the above. ____ 6. Which of the following partnership owners is personally liable for the entity?s debts to general creditors? a. A general partner in a general partnership. b. A limited partner in a limited partnership. c. A member of a limited liability company. d. A partner in a limited liability limited partnership. e. None of these owners are personally liable for entity debts. ____ 7. Which of the following is a correct definition of a concept related to partnership taxation? a. A partner?s capital sharing ratio is defined as the percent of partnership profits that will be allocated to the partner. b. The partnership?s inside basis is defined as the sum of each partner?s capital account balance. c. The entity concept treats partners and partnerships as separate units and gives the partnership its own tax ?personality.? 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. ____ 8. 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 acquires the asset from a partner as a contribution to partnership capital under ? 721(a). d. The partnership leases the asset from a partner on a one-year lease. e. None of the above. ____ 9. Kevin, Chuck, 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). Chuck 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. Chuck?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, Chuck, and Greg, respectively. e. All of these statement are correct. 10. Tina and Randy formed the TR Partnership four years ago. Because they decided the company needed some expertise in multimedia presentations, they offered Susan 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 Susan. How should Susan treat the receipt of the partnership interest in the current year? a. Nontaxable. b. $25,000 short-term capital gain. c. $25,000 long-term capital gain. d. $25,000 ordinary income. e. None of the above. ____ 11. When property is contributed to a partnership for a capital and profits interest, the holding period of the contributing partner?s interest: a. May include the holding period of the contributed property. b. Always starts the day after the contribution date. c. Always starts the day the property was contributed. d. Never includes the holding period of the contributed property. e. None of the above. ____ 12. Which of the following is an election or calculation made by the partner rather than the partnership? a. The amount of the ? 199 (domestic production activities) deduction related to partnership activities. b. The taxable year of the partnership. c. The depreciation method used for partnership property. d. Amortization of organizational and startup expenses incurred by the partnership. e. All of the above elections are made by the partnership. ____ 13. 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 14. Fern, Inc., Ivy Inc., and Jason formed a general partnership, each contributing equally. 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 since it has no principal partners. b. The partnership can choose the taxable year of any of its ?principal partners? without obtaining IRS permission. c. The partnership can choose a January 31 fiscal year without obtaining IRS permission, if the partnership can prove that the January 31 fiscal year will reduce the cost of preparing the partnership tax return. d. The partnership can choose the taxable year that provides for the ?least aggregate deferral? without obtaining IRS permission. e. None of the above. ____ 15. Julie contributed fully depreciated ($0 basis) property valued at $20,000 to the JK Partnership in exchange for a 50% interest in partnership capital and profits. During the first year of partnership operations, JK had net taxable income of $50,000. The partnership distributed $20,000 cash to Julie. Julie?s adjusted basis (outside basis) for her partnership interest at year-end is: a. $0. b. $5,000. c. $25,000. d. $30,000. e. None of the above. ____ 16. In the current year, the POD Partnership received revenues of $100,000 and paid the following amounts: $20,000 in rent and utilities, and $10,000 as a distribution to partner Olivia. In addition, the partnership earned $4,000 of qualifying dividend income during the year. Partner Don owns a 50% interest in the partnership. How much income must Don report for the tax year? a. $42,000 ordinary income. b. $37,000 ordinary income. c. $40,000 ordinary income; $2,000 of qualifying dividends. d. $35,000 ordinary income; $2,000 of qualifying dividends. e. None of the above. ____ 17. Roger is a 30% partner in the ROC Partnership. At the beginning of the tax year, Roger?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, Roger?s share of partnership liabilities increased by $20,000. Roger?s basis in the partnership interest at the end of the year is: a. $60,000. b. $75,000. c. $87,000. d. $120,000. e. None of the above. 18. Marianne is a 50% partner in the BAM Partnership. At the beginning of the tax year, Marianne?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 Marianne and paid partner Barry 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, Marianne?s share of partnership liabilities decreased by $30,000. Assuming loss limitation rules do not apply, Marianne?s basis in the partnership interest at the end of the year is: a. $90,000. b. $95,000. c. $100,000. d. $135,000. e. None of the above. ____ 19. 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. ____ 20. William?s basis in the WAM Partnership interest was $100,000 just before he received a proportionate liquidating distribution consisting of investment land (basis of $30,000, fair market value $40,000), and inventory (basis of $30,000, fair market value $70,000). After the distribution, William?s recognized gain or loss and his basis in the land and inventory are: a. $40,000 loss; $30,000 (land); $30,000 (inventory). b. $10,000 gain; $40,000 (land); $70,000 (inventory). c. $0 gain or loss; $30,000 (land); $70,000 (inventory). d. $0 gain or loss; $70,000 (land); $30,000 (inventory). e. None of the above. ____ 21. Jamie owns a 40% interest in the JSD LLC. In liquidation of the entity, Jamie receives a proportionate distribution of $20,000 cash, inventory (basis of $12,000 and fair market value of $14,000), and land (basis of $10,000 and fair market value of $30,000). Jamie?s basis in the entity immediately before the distribution was $50,000. As a result of the distribution, what is Jamie?s basis in the inventory and land, and how much gain or loss does she recognize? a. $0 basis in inventory; $30,000 basis in land; $0 gain or loss. b. $12,000 basis in inventory; $18,000 basis in land; $0 gain or loss. c. $12,000 basis in inventory; $10,000 basis in land; $8,000 loss. d. $14,000 basis in inventory; $30,000 basis in land; $14,000 gain. e. $30,000 basis in inventory; $0 basis in land; $0 gain or loss. 22. In a proportionate liquidating distribution, Barbara receives a distribution of $40,000 cash, accounts receivable (basis of $0 and fair market value of $20,000), and land (basis of $20,000 and fair market value of $30,000). In addition, the partnership repays all liabilities, of which Barbara?s share was $40,000. Barbara?s basis in the entity immediately before the distribution was $50,000. As a result of the distribution, what is Barbara?s basis in the accounts receivable and land, and how much gain or loss does she recognize? a. $0 basis in accounts receivable; $0 basis in land; $30,000 gain. b. $0 basis in accounts receivable; $10,000 basis in land; $0 gain or loss. c. $0 basis in accounts receivable; $20,000 basis in land; $0 gain or loss. d. $20,000 basis in accounts receivable; $30,000 basis in land; $40,000 gain. e. $20,000 basis in accounts receivable; $30,000 basis in land; $80,000 gain. ____ 23. An S corporation may be subject to the following tax. a. Built-in gains tax. b. Accumulated earnings tax. c. Personal holding company tax. d. Alternative minimum tax. e. None of the above is paid by S corporations. ____ 24. Which, if any, of the following can be eligible shareholders of an S corporation? a. A resident alien. b. Partnership. c. A foreign corporation. d. A nonqualifying trust. e. None of the above can own stock. ____ 25. Several individuals acquire assets on behalf of Skip Corporation on May 28, 2010, purchased assets on June 3, 2010, and begin doing business on June 11, 2010. They subscribe to shares of stock, file articles of incorporation for Skip, and become shareholders on June 21, 2010. The S election must be filed no later than 2 1/2 months after: a. May 28, 2010. b. June 3, 2010. c. June 11, 2010. d. June 21, 2010. e. December 31, 2010. ____ 26. Which type of distribution from an S corporation is taxed at the 0/15% rate? a. AAA. b. PTI. c. OAA. d. AEP. e. None of the above. ____ 27. Which transaction affects the Other Adjustments Account on an S corporation?s Schedule M-2? a. Taxable dividends. b. Stock dividend (taxable). c. Section 1250 gain. d. Tax-exempt income. e. None of the above 28. Which transaction affects the Other Adjustments Account on an S corporation?s Schedule M-2? a. Charitable contributions. b. Unreasonable compensation. c. Payroll tax penalty assessed. d. Section 1245 income. e. None of the above. ____ 29. During 2010, Shirley Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. On December 31, 2009, her stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct? a. Nutt recognizes a $1,000 LTCG. b. Nutt?s stock basis will be $2,000. c. Nutt?s ordinary income is $15,000. d. Nutt?s return of capital is $11,000. e. None of the above. ____ 30. Beginning in 2010, the AAA of Amit, Inc., an S corporation, has a balance of $725,000. During the year, the following items occur. Operating income $472,000 Interest income 6,500 Dividend income 14,050 Municipal bond interest income 6,000 Long-term capital loss from sale of investment land 7,400 Charitable contributions 19,000 Cash distributions to shareholders 57,000 Amit?s ending AAA balance is: a. $1,153,150. b. $1,134,150. c. $1,127,650. d. $1,126,750. ____ 31. Fred is the sole shareholder of an S corporation in Fort Deposit, Alabama. At a time when his stock basis is $10,000, the corporation distributes appreciated property worth $100,000 (basis of $10,000). There is no built-in gain. Fred?s taxable gain is: a. $0. b. $10,000. c. $90,000. d. $100,000. e. None of the above 32. You are given the following facts about a one-shareholder S corporation, and you are asked to prepare the shareholder?s ending stock basis. Ordinary income $100,000 Payroll tax penalty 2,140 Stock purchases 32,000 Tax-exempt insurance proceeds 50,000 Insurance premiums paid (nondeductible) 2,700 Beginning stock basis 36,800 a. $163,960. b. $181,960. c. $213,960. d. $216,100. ____ 33. You are given the following facts about a 50% owner of an S corporation, and you are asked to prepare her ending stock basis. Increase in AAA $32,000 Increase in OAA 6,300 Payroll tax penalty 2,140 Ending PTI 6,125 Beginning stock basis 36,800 Tax-exempt interest income 4,800 Insurance premiums paid (nondeductible) 2,700 Stock purchases 22,000 a. $77,950. b. $82,750. c. $97,100. d. $103,225. ____ 34. An S corporation in Lawrence, Kansas has a recognized built-in gain of $110,000 and taxable income of $98,000. The company has an $8,000 NOL carryforward from a C corporation year, and a $9,000 business credit carryforward from a C corporation year. The built-in gains tax liability is: a. $0. b. $22,500. c. $25,300. d. $30,500. e. None of the above. ____ 35. A cash basis calendar year C corporation in Athens, Georgia, has $100,000 of accounts receivable on the date of its conversion to an S corporation on February 14. By the end of the year, $70,000 of these receivables are collected. Calculate any built-in gains tax, assuming that there is sufficient taxable income. a. $0. b. $10,500. c. $24,500. d. $35,000. e. Some other amount. 36. The LN partnership reported the following items of income and deduction during the current tax year: revenues, $200,000; cost of goods sold, $80,000; tax-exempt interest income, $5,000; salaries to employees, $50,000; and long-term capital gain, $5,000. In addition, the partnership distributed $10,000 of cash to 50% partner Nina and $20,000 of cash to 50% partner Len. What is Nina?s share of ordinary partnership income and separately stated items? 37. An examination of the RB Partnership?s tax books provides the following information for the current year: Operating (ordinary) income before guaranteed payments $225,000 Qualified dividend income 4,000 Guaranteed payment to Barry 25,000 Cash distributions to each partner 30,000 Interest on Georgia state bonds (exempt interest income) 2,000 Interest paid on funds used to purchase Georgia state bonds 500 Charitable contributions made by partnership 4,000 Increase in partnership liabilities from 1/1-12/31 30,000 Barry is a 30% partner in partnership capital, profits, and losses. Assume the adjusted basis of his partnership interest is $50,000 at the beginning of the year, and he shares in 30% of the partnership liabilities for basis purposes. a. What is Barry?s adjusted basis for the partnership interest at the end of the year? b. How much income must Barry report on his tax return for the current year? What is the character of income? 38. Sharon and Sara are equal partners in the S&S Partnership. On January 1 of the current year, each partner?s adjusted basis in S&S was $50,000 (including each partner?s $15,000 share of the partnership?s $30,000 of liabilities). During the current year, S&S repaid the $30,000 of liabilities and borrowed $20,000 for which Sharon and Sara are equally liable. In the current year ended December 31, S&S also sustained a net operating loss of $25,000 and earned $5,000 of interest and qualified dividend income from investments. If liabilities are shared equally by the partners, on January 1 of the next year how much is each partner?s basis in her interest in S&S? 39. The MOP Partnership is involved in leasing heavy equipment under long-term leases of five years or more. Patsy has an adjusted basis for her partnership interest on January 1 of the current year of $600,000, consisting of the following: Capital account $350,000 Share of partnership recourse debt 50,000 Share of partnership nonrecourse debt 200,000 $600,000 During the year, the partnership has an operating loss of $1.2 million and distributes $60,000 of cash to Patsy. Partnership liabilities were the same at the end of the tax year, and the nonrecourse debt is not ?qualified nonrecourse debt.? If she owns a 60% share of partnership profits, capital, and losses, and is a material participant in the partnership, how much of her share of the operating loss can Patsy deduct? What Code provisions could cause a suspension of the loss? 40. Suzy owns a 25% capital and profits interest in the calendar-year SJDV Partnership. Her adjusted basis for her partnership interest on July 1 of the current year is $200,000. On that date, she receives a proportionate nonliquidating current distribution of the following assets: Partnership?s Basis in Asset Asset?s Fair Market Value Cash $ 80,000 $ 80,000 Inventory 130,000 150,000 Land 90,000 105,000 a. Calculate Suzy?s recognized gain or loss on the distribution, if any. b. Calculate Suzy?s basis in the inventory received. c. Calculate Suzy?s basis in land received. The land is a capital asset. d. Calculate Suzy?s basis for her partnership interest after the distribution.,Please, I would like to know if i can get help with this homework and if I do, please let me know as soon as possible. Thank YOu,Hello Mr. Michael I, I would like to know when can I expect my homework. My dateline was for today. Sunday May 1, 2011. Thank you,Thank you so much.,Hello, I'm very dissapointed since most of my questions and problems were wrong.

 

Paper#6764 | Written in 18-Jul-2015

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