Question 1

Which of the following is not a characteristic of a partnership?

Accepted Answer

A) Must meet 80 percent control requirement for formation to be tax free 
B) Cash distributions to partners may be taxable 
C) Loss is only recognized on liquidating distributions 
D) General partners' salaries are subject to FICA taxes. 
A) Must meet 80 percent control requirement for formation to be tax free 
B) Cash distributions to partners may be taxable 
C) Loss is only recognized on liquidating distributions 
D) General partners' salaries are subject to FICA taxes. A

Question 2

Material participation includes all of the following except:

Accepted Answer

A) Material participation in 5 of the 10 preceding years. 
B) Taxpayer materially participated in the five preceding years in a personal service activity. 
C) The taxpayer has 500 or more hours of participation 
D) All are material participation standards. 
A) Material participation in 5 of the 10 preceding years. 
B) Taxpayer materially participated in the five preceding years in a personal service activity. 
C) The taxpayer has 500 or more hours of participation 
D) All are material participation standards. D

Question 3

The owners of a limited liability company are called members.

Accepted Answer

A) True 
 B)False  True

Question 4

____ 19.A person satisfies material participation requirements only through current activity.

Accepted Answer

A) True 
 B)False

Question 5

Bill has a $15,000 passive loss,a $12,000 passive gain,$20,000 of active income,and a $14,000 active loss.What is Bill's current year net taxable income or loss?

Accepted Answer

A) $20,000 income 
B) $6,000 income 
C) $3,000 income 
D) 0 
A) $20,000 income 
B) $6,000 income 
C) $3,000 income 
D) 0

Question 6

What tax year end must a partnership use?

Accepted Answer

A partnership must use: a.The tax year o

Question 7

James and Jerry are equal partners in JJ partnership.James works full-time in the business and receives a $40,000 guaranteed salary from the partnership.Jerry is to receive the first $20,000 of profits before the remainder is divided equally between James and Jerry.If the accounting income before either of these payments is $30,000,what is the amount of income or loss allocated to Jerry?

Accepted Answer

A) 0 
B) $10,000 
C) ($5,000) 
D) ($10,000) 
A) 0 
B) $10,000 
C) ($5,000) 
D) ($10,000)

Question 8

A loss is never recognized on a nonliquidating distribution from a partnership.

Accepted Answer

A) True 
 B)False

Question 9

The AAA of the S corporation is a corporate-level account.

Accepted Answer

A) True 
 B)False

Question 10

The accumulated adjustment account

Accepted Answer

A) is a shareholder account. 
B) can be reduced below zero by an excess distribution. 
C) determines when there is a tax-free distribution during the post-termination period. 
D) is important in applying loss limitation rules. 
A) is a shareholder account. 
B) can be reduced below zero by an excess distribution. 
C) determines when there is a tax-free distribution during the post-termination period. 
D) is important in applying loss limitation rules.

Question 11

Which of the following is not a characteristic of an S corporation?

Accepted Answer

A) Must be formed under state law 
B) The transfer of property for stock is always tax-free 
C) A shareholder's share of ordinary income increases his or her stock basis 
D) The shareholder never recognizes loss on a nonliquidating distribution 
A) Must be formed under state law 
B) The transfer of property for stock is always tax-free 
C) A shareholder's share of ordinary income increases his or her stock basis 
D) The shareholder never recognizes loss on a nonliquidating distribution

Question 12

The passive activity loss rules apply

Accepted Answer

A) before the loss limitation rules. 
B) after the loss limitation rules only. 
C) after the at-risk limitation rules only. 
D) after the loss limitation and at-risk limitation rules. 
A) before the loss limitation rules. 
B) after the loss limitation rules only. 
C) after the at-risk limitation rules only. 
D) after the loss limitation and at-risk limitation rules.

Question 13

Which of the following is not a separately stated item on a partnership's Schedule K?

Accepted Answer

A) A $5,000 long-term capital loss 
B) $20,000 of Section 1245 recapture 
C) $3,000 charitable contribution 
D) $5,000 bond interest 
A) A $5,000 long-term capital loss 
B) $20,000 of Section 1245 recapture 
C) $3,000 charitable contribution 
D) $5,000 bond interest

Question 14

Once established at entry,a partner's basis account does not change.

Accepted Answer

A) True 
 B)False

Question 15

____ 11.The basis limitation rules are applied after the at-risk and passive loss limitation rules.

Accepted Answer

A) True 
 B)False

Question 16

ABC Partnership has two assets: inventory (fair market value = $20,000; basis = $25,000)and land (fair market value = $100,000; basis = $50,000)when Janine sells her 40 percent interest in ABC with a $30,000 basis for $48,000.What is the amount and type of Janine's gain or loss on the sale of her partnership interest?

Accepted Answer

.4 ($20,000 - $25,000)= $2,000

Question 17

Partners pay taxes on their share of all the partnership net income annually.

Accepted Answer

A) True 
 B)False

Question 18

The LBJ Partnership has a March 31 year-end.It has three equal partners,L with a June 30 year-end,B with a January 31 year-end,and J with a December 31 year-end.What are the year-end dates for the tax returns of the partners that will include their shares of the partnership's income as of March 31,2015?

Accepted Answer

L: June 30,2015
B: J

Question 19

Sue is a 50 percent working partner in a partnership.She is guaranteed an annual salary of $60,000.Jim,the other 50 percent partner,is to receive the first $10,000 of partnership profits before the balance is divided equally between them.During the year,the partnership's accounting results were $40,000 of income before any partner allocations.What amount of income will Sue be taxed on?

Accepted Answer

$40,000 - $60,000 = ($20,000);

Question 20

Walter owns and manages his 50 percent interest in a rental apartment complex.His AGI for the current year is $110,000 excluding his portion of the $70,000 loss from the apartment complex.What is his loss carryover?

Accepted Answer

A) 0 
B) $15,000 
C) $25,000 
D) $35,000 
A) 0 
B) $15,000 
C) $25,000 
D) $35,000

Which of the following is not a characteristic of a partnership?

Material participation includes all of the following except:

The owners of a limited liability company are called members.

____ 19.A person satisfies material participation requirements only through current activity.

Bill has a $15,000 passive loss,a $12,000 passive gain,$20,000 of active income,and a $14,000 active loss.What is Bill's current year net taxable income or loss?

What tax year end must a partnership use?

A loss is never recognized on a nonliquidating distribution from a partnership.

The AAA of the S corporation is a corporate-level account.

The accumulated adjustment account

Which of the following is not a characteristic of an S corporation?

The passive activity loss rules apply

Which of the following is not a separately stated item on a partnership's Schedule K?

Once established at entry,a partner's basis account does not change.

____ 11.The basis limitation rules are applied after the at-risk and passive loss limitation rules.

Partners pay taxes on their share of all the partnership net income annually.

Walter owns and manages his 50 percent interest in a rental apartment complex.His AGI for the current year is $110,000 excluding his portion of the $70,000 loss from the apartment complex.What is his loss carryover?

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Income Taxation of Individuals

Wealth Transfer Taxes

Filters

Exam 10: Sole Proprietorships and Flow-Through Entities

Which of the following is not a characteristic of a partnership?

Material participation includes all of the following except:

The owners of a limited liability company are called members.

____ 19.A person satisfies material participation requirements only through current activity.

Bill has a $15,000 passive loss,a $12,000 passive gain,$20,000 of active income,and a $14,000 active loss.What is Bill's current year net taxable income or loss?

What tax year end must a partnership use?

A loss is never recognized on a nonliquidating distribution from a partnership.

The AAA of the S corporation is a corporate-level account.

The accumulated adjustment account

Which of the following is not a characteristic of an S corporation?

The passive activity loss rules apply

Which of the following is not a separately stated item on a partnership's Schedule K?

Once established at entry,a partner's basis account does not change.

____ 11.The basis limitation rules are applied after the at-risk and passive loss limitation rules.

Partners pay taxes on their share of all the partnership net income annually.

Walter owns and manages his 50 percent interest in a rental apartment complex.His AGI for the current year is $110,000 excluding his portion of the $70,000 loss from the apartment complex.What is his loss carryover?

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Income Taxation of Individuals

Wealth Transfer Taxes

Filters