Question 1

Match each of the following statements with the terms below that provide the best definition
-Separately stated item

Accepted Answer

A) Organizational choice of many large accounting firms. 
B) Partner's percentage allocation of current operating income. 
C) Might affect any two partners' tax liabilities in different ways. 
D) Brokerage and registration fees incurred for promoting and marketing partnership interests. 
E) Transfer of asset to partnership followed by immediate distribution of cash to partner.
F)Must have at least one general and one limited partner.
G)All partners are jointly and severally liable for entity debts.
H)Theory treating the partner and partnership as separate economic units.
I)Partner's basis in partnership interest after tax-free contribution of asset to partnership.
J)Partnership's basis in asset after tax-free contribution of asset to partnership.
K)Owners are "members."
L)Theory treating the partnership as a collection of taxpayers joined in an agency relationship.
M)Allows many unincorporated entities to select their Federal tax status.
N)No correct match provided. 
A) Organizational choice of many large accounting firms. 
B) Partner's percentage allocation of current operating income. 
C) Might affect any two partners' tax liabilities in different ways. 
D) Brokerage and registration fees incurred for promoting and marketing partnership interests. 
E) Transfer of asset to partnership followed by immediate distribution of cash to partner.
F)Must have at least one general and one limited partner.
G)All partners are jointly and severally liable for entity debts.
H)Theory treating the partner and partnership as separate economic units.
I)Partner's basis in partnership interest after tax-free contribution of asset to partnership.
J)Partnership's basis in asset after tax-free contribution of asset to partnership.
K)Owners are "members."
L)Theory treating the partnership as a collection of taxpayers joined in an agency relationship.
M)Allows many unincorporated entities to select their Federal tax status.
N)No correct match provided. C

Question 2

Which one of the following is not shown on the partnership's Schedule K on Page 4 of Form 1065?

Accepted Answer

A)  The partnership's self-employment income. 
B)  The partnership's separately stated income and deductions. 
C)  The partnership's tax preference and adjustment items. 
D)  The partnership's net operating loss carryforward. 
E)  All of the above. 
A)  The partnership's self-employment income. 
B)  The partnership's separately stated income and deductions. 
C)  The partnership's tax preference and adjustment items. 
D)  The partnership's net operating loss carryforward. 
E)  All of the above. D

Question 3

Match each of the following statements with the terms below that provide the best definition
-Syndication costs

Accepted Answer

A) Organizational choice of many large accounting firms. 
B) Partner's percentage allocation of current operating income. 
C) Might affect any two partners' tax liabilities in different ways. 
D) Brokerage and registration fees incurred for promoting and marketing partnership interests. 
E) Transfer of asset to partnership followed by immediate distribution of cash to partner.
F)Must have at least one general and one limited partner.
G)All partners are jointly and severally liable for entity debts.
H)Theory treating the partner and partnership as separate economic units.
I)Partner's basis in partnership interest after tax-free contribution of asset to partnership.
J)Partnership's basis in asset after tax-free contribution of asset to partnership.
K)Owners are "members."
L)Theory treating the partnership as a collection of taxpayers joined in an agency relationship.
M)Allows many unincorporated entities to select their Federal tax status.
N)No correct match provided. 
A) Organizational choice of many large accounting firms. 
B) Partner's percentage allocation of current operating income. 
C) Might affect any two partners' tax liabilities in different ways. 
D) Brokerage and registration fees incurred for promoting and marketing partnership interests. 
E) Transfer of asset to partnership followed by immediate distribution of cash to partner.
F)Must have at least one general and one limited partner.
G)All partners are jointly and severally liable for entity debts.
H)Theory treating the partner and partnership as separate economic units.
I)Partner's basis in partnership interest after tax-free contribution of asset to partnership.
J)Partnership's basis in asset after tax-free contribution of asset to partnership.
K)Owners are "members."
L)Theory treating the partnership as a collection of taxpayers joined in an agency relationship.
M)Allows many unincorporated entities to select their Federal tax status.
N)No correct match provided. D

Question 4

The amount of a partnership's income and loss from operating activities is combined with separately stated income and expenses to determine the partnership's equivalent of "taxable income." This amount is reconciled to book income on the partnership's Schedule M-1 or Schedule M-3.

Accepted Answer

A) True 
 B)False

Question 5

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.

Accepted Answer

A) True 
 B)False

Question 6

Harry's basis in his partnership interest was $10,000 at the beginning of the tax year. For the year, his share of the partnership's loss was $8,000, and he also received a distribution of $4,000. Harry can deduct an $8,000 loss, and he recognizes a gain of $2,000 on the distribution of cash in excess of his remaining basis.

Accepted Answer

A) True 
 B)False

Question 7

A partner will have the same profit-sharing, loss-sharing, and capital-sharing ownership percentages.

Accepted Answer

A) True 
 B)False

Question 8

On a corporate Form 1120, Schedule M-1 (or M-3) is used to reconcile book and tax income, and Schedule M-2 reconciles retained earnings to the amounts shown on Schedule L. How are these reconciliations accomplished on a partnership return? What additional information must be provided?

Accepted Answer

A partnership is not a taxpaying entity

Question 9

Partners' capital accounts should be determined using the same method on Form 1065 Schedule L, Form 1065 Schedule M-2, and the Schedules K-1 prepared for the partners.

Accepted Answer

A) True 
 B)False

Question 10

A partnership is an association formed by two or more taxpayers (which may be any type of entity) to carry on a trade or business.

Accepted Answer

A) True 
 B)False

Question 11

George received a fully-vested 10% interest in partnership capital and a 20% interest in future partnership profits in exchange for services rendered to the GHP, LLC (not a publicly-traded partnership interest). The future profits of the partnership are subject to normal operating risks. George will report ordinary income equal to the fair market value of the profits interest, but the capital interest will not be currently taxed to him.

Accepted Answer

A) True 
 B)False

Question 12

The "inside basis" is defined as a partner's basis in the partnership interest.

Accepted Answer

A) True 
 B)False

Question 13

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.

Accepted Answer

A) True 
 B)False

Question 14

If a partnership earns tax-exempt income, the income should not affect the partners' bases in their partnership interests. Do you agree with this statement? Explain.

Accepted Answer

Partnership income is intended to be sub

Question 15

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 in proportion to those ending capital account balances.

Accepted Answer

A) True 
 B)False

Question 16

Match each of the following statements with the terms below that provide the best definition
-Inside basis

Accepted Answer

A) Adjusted basis of each partnership asset. 
B) Operating expenses incurred after entity is formed but before it begins doing business. 
C) Each partner's basis in the partnership. 
D) Reconciles book income to "taxable income." 
E) Tax accounting election made by partnership.
F)Tax accounting calculation made by partner.
G)Tax accounting election made by partner.
H)Does not include liabilities.
I)Designed to prevent excessive deferral of taxation of partnership income.
J)Amount that may be received by partner for performance of services for the partnership.
K)Computation that determines the way recourse debt is shared.
L)Will eventually be allocated to partner making tax-free property contribution to partnership.
M)Partner's share of partnership items.
N)Must generally be satisfied by any allocation to the partners.
O)Justification for a tax year other than the required taxable year.
P)No correct match is provided. 
A) Adjusted basis of each partnership asset. 
B) Operating expenses incurred after entity is formed but before it begins doing business. 
C) Each partner's basis in the partnership. 
D) Reconciles book income to "taxable income." 
E) Tax accounting election made by partnership.
F)Tax accounting calculation made by partner.
G)Tax accounting election made by partner.
H)Does not include liabilities.
I)Designed to prevent excessive deferral of taxation of partnership income.
J)Amount that may be received by partner for performance of services for the partnership.
K)Computation that determines the way recourse debt is shared.
L)Will eventually be allocated to partner making tax-free property contribution to partnership.
M)Partner's share of partnership items.
N)Must generally be satisfied by any allocation to the partners.
O)Justification for a tax year other than the required taxable year.
P)No correct match is provided.

Question 17

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.

Accepted Answer

A) True 
 B)False

Question 18

On the formation of a partnership, when might a "disguised sale" occur? How can this treatment be avoided?

Accepted Answer

A disguised sale might occur when a part

Question 19

Syndication costs arise when partnership interests are being marketed to investors. These costs cannot be amortized or deducted.

Accepted Answer

A) True 
 B)False

Question 20

An example of the "aggregate concept" underlying partnership taxation is the fact that the partners (rather than the partnership) pay tax on partnership income.

Accepted Answer

A) True 
 B)False

Match each of the following statements with the terms below that provide the best definition -Separately stated item

Which one of the following is not shown on the partnership's Schedule K on Page 4 of Form 1065?

Match each of the following statements with the terms below that provide the best definition -Syndication costs

The amount of a partnership's income and loss from operating activities is combined with separately stated income and expenses to determine the partnership's equivalent of "taxable income." This amount is reconciled to book income on the partnership's Schedule M-1 or Schedule M-3.

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 partner will have the same profit-sharing, loss-sharing, and capital-sharing ownership percentages.

On a corporate Form 1120, Schedule M-1 (or M-3) is used to reconcile book and tax income, and Schedule M-2 reconciles retained earnings to the amounts shown on Schedule L. How are these reconciliations accomplished on a partnership return? What additional information must be provided?

Partners' capital accounts should be determined using the same method on Form 1065 Schedule L, Form 1065 Schedule M-2, and the Schedules K-1 prepared for the partners.

A partnership is an association formed by two or more taxpayers (which may be any type of entity) to carry on a trade or business.

The "inside basis" is defined as a partner's basis in the partnership interest.

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.

If a partnership earns tax-exempt income, the income should not affect the partners' bases in their partnership interests. Do you agree with this statement? Explain.

Match each of the following statements with the terms below that provide the best definition -Inside basis

On the formation of a partnership, when might a "disguised sale" occur? How can this treatment be avoided?

Syndication costs arise when partnership interests are being marketed to investors. These costs cannot be amortized or deducted.

An example of the "aggregate concept" underlying partnership taxation is the fact that the partners (rather than the partnership) pay tax on partnership income.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Distributions, Transfer of Interests, and Terminations

S Corporations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 10: Partnerships: Formation, Operation, and Basis

Match each of the following statements with the terms below that provide the best definition -Separately stated item

Which one of the following is not shown on the partnership's Schedule K on Page 4 of Form 1065?

Match each of the following statements with the terms below that provide the best definition -Syndication costs

The amount of a partnership's income and loss from operating activities is combined with separately stated income and expenses to determine the partnership's equivalent of "taxable income." This amount is reconciled to book income on the partnership's Schedule M-1 or Schedule M-3.

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 partner will have the same profit-sharing, loss-sharing, and capital-sharing ownership percentages.

On a corporate Form 1120, Schedule M-1 (or M-3) is used to reconcile book and tax income, and Schedule M-2 reconciles retained earnings to the amounts shown on Schedule L. How are these reconciliations accomplished on a partnership return? What additional information must be provided?

Partners' capital accounts should be determined using the same method on Form 1065 Schedule L, Form 1065 Schedule M-2, and the Schedules K-1 prepared for the partners.

A partnership is an association formed by two or more taxpayers (which may be any type of entity) to carry on a trade or business.

The "inside basis" is defined as a partner's basis in the partnership interest.

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.

If a partnership earns tax-exempt income, the income should not affect the partners' bases in their partnership interests. Do you agree with this statement? Explain.

Match each of the following statements with the terms below that provide the best definition -Inside basis

On the formation of a partnership, when might a "disguised sale" occur? How can this treatment be avoided?

Syndication costs arise when partnership interests are being marketed to investors. These costs cannot be amortized or deducted.

An example of the "aggregate concept" underlying partnership taxation is the fact that the partners (rather than the partnership) pay tax on partnership income.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Distributions, Transfer of Interests, and Terminations

S Corporations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters