Question 1

Match each of the following statements with the terms below that provide the best definition
-Limited partnership

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.

Question 2

Match each of the following statements with the terms below that provide the best definition
-Disguised sale

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.

Question 3

If a partnership allocates losses to the partners, the partners must first apply the passive loss limitations, then the basis limitation, and finally the at-risk limitations. If all three hurdles are met, the partner may deduct the loss.

Accepted Answer

A) True 
 B)False

Question 4

The taxable income of a partnership flows through to the partners, who report the income on their tax returns.

Accepted Answer

A) True 
 B)False

Question 5

Blaine contributes property valued at $50,000 (basis of $40,000) in exchange for a 25% interest in the BIKE Partnership. If the property is later sold for $70,000, gain of $15,000 will be allocated to Blaine.

Accepted Answer

A) True 
 B)False

Question 6

Morgan is a 50% managing member in the calendar year, cash basis MKK LLC. The LLC received $150,000 income from services and paid the following other amounts:   
​
How much will Morgan's adjusted gross income increase as a result of the above items? What amount will be included in Morgan's self-employment tax calculation?

Accepted Answer

$65,000 income and amount included in SE

Question 7

A partnership cannot use the cash method of accounting if one of the partners is a C corporation.

Accepted Answer

A) True 
 B)False

Question 8

Carli contributes land to the newly formed CD Partnership in exchange for a 30% interest. The land has an adjusted basis and fair market value of $300,000 and is subject to a liability of $100,000, which the partnership assumes. None of this liability is repaid at year-end. At the end of the year, the partnership has trade accounts payable of $20,000. Assume all liabilities are allocated proportionately to the partners. Total partnership income for the year is $400,000. What is Carli's basis in her partnership interest at the end of the year?

Accepted Answer

Carli's basis in the

Question 9

Which of the following statements is correct regarding the manner in which partnership liabilities are reflected in the partners' bases in their partnership interests?

Accepted Answer

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. 
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.

Question 10

Ashley purchased her partnership interest from Lindsey on the first day of the current year for $40,000 cash. She received a $10,000 cash distribution from the partnership during the year, and her share of partnership income is $15,000. Her share of partnership liabilities on the last day of the partnership year is $20,000. Ashley's outside basis for her partnership interest at the end of the year is $45,000.

Accepted Answer

A) True 
 B)False

Question 11

Match each of the following statements with the terms below that provide the best definition
-Guaranteed payment

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 12

Items that are not required to be shown on the partners' Schedules K-1 include AMT adjustments and preferences and taxes paid to foreign countries, as AMT and the foreign tax credit are calculated by the partnership.

Accepted Answer

A) True 
 B)False

Question 13

ABC, LLC is equally-owned by three corporations. Two corporations have June 30 fiscal year ends, the third is a calendar-year taxpayer. ABC will use the least aggregate deferral method to determine its taxable year-end.

Accepted Answer

A) True 
 B)False

Question 14

Sharon and Sue are equal partners in the S&S Partnership. On January 1 of the current year, each partner's adjusted basis in S&S was $80,000 (including each partner's $20,000 share of the partnership's $40,000 of liabilities). During the current year, S&S repaid $30,000 of the debt and borrowed $20,000 for which Sharon and Sue are equally liable. In the current year ended December 31, S&S also sustained a net operating loss of $40,000 and earned $10,000 of interest 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?

Accepted Answer

$60,000. Each partner's initial basis in

Question 15

On a partnership's Form 1065, which of the following statements is not true?

Accepted Answer

A)  The partnership reconciles its net (tax basis) 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)  None of the above statements are true. 
A)  The partnership reconciles its net (tax basis) 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)  None of the above statements are true.

Question 16

A limited partnership (LP) offers all partners protection from claims by the LP's creditors.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is not a specific adjustment to the partners' basis in the partnership interest?

Accepted Answer

A)  Increased by contributions the partner made to the partnership. 
B)  Decreased by the amount of guaranteed payments shown on the partner's Schedule K-1. 
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. 
A)  Increased by contributions the partner made to the partnership. 
B)  Decreased by the amount of guaranteed payments shown on the partner's Schedule K-1. 
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.

Question 18

In a limited liability company, all members are protected from all debts of the partnership unless they personally guaranteed the debt.

Accepted Answer

A) True 
 B)False

Question 19

On January 1 of the current year, Anna and Jason form an equal partnership. Anna contributes $50,000 cash and a parcel of land (adjusted basis of $100,000; fair market value of $150,000) in exchange for her interest in the partnership. Jason contributes property (adjusted basis of $180,000; fair market value of $200,000) in exchange for his partnership interest. Which of the following statements is true concerning the income tax results of this partnership formation?

Accepted Answer

A)  Jason recognizes a $20,000 gain on his property transfer. 
B)  Jason has a $200,000 tax basis for his partnership interest. 
C)  Anna has a $150,000 tax basis for her partnership interest. 
D)  The partnership has a $150,000 adjusted basis in the land contributed by Anna. 
E)  None of the statements is true. 
A)  Jason recognizes a $20,000 gain on his property transfer. 
B)  Jason has a $200,000 tax basis for his partnership interest. 
C)  Anna has a $150,000 tax basis for her partnership interest. 
D)  The partnership has a $150,000 adjusted basis in the land contributed by Anna. 
E)  None of the statements is true.

Question 20

Match each of the following statements with the terms below that provide the best definition
-Check the box regulations

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.

Match each of the following statements with the terms below that provide the best definition -Limited partnership

Match each of the following statements with the terms below that provide the best definition -Disguised sale

If a partnership allocates losses to the partners, the partners must first apply the passive loss limitations, then the basis limitation, and finally the at-risk limitations. If all three hurdles are met, the partner may deduct the loss.

The taxable income of a partnership flows through to the partners, who report the income on their tax returns.

Blaine contributes property valued at $50,000 (basis of $40,000) in exchange for a 25% interest in the BIKE Partnership. If the property is later sold for $70,000, gain of $15,000 will be allocated to Blaine.

A partnership cannot use the cash method of accounting if one of the partners is a C corporation.

Which of the following statements is correct regarding the manner in which partnership liabilities are reflected in the partners' bases in their partnership interests?

Match each of the following statements with the terms below that provide the best definition -Guaranteed payment

Items that are not required to be shown on the partners' Schedules K-1 include AMT adjustments and preferences and taxes paid to foreign countries, as AMT and the foreign tax credit are calculated by the partnership.

ABC, LLC is equally-owned by three corporations. Two corporations have June 30 fiscal year ends, the third is a calendar-year taxpayer. ABC will use the least aggregate deferral method to determine its taxable year-end.

On a partnership's Form 1065, which of the following statements is not true?

A limited partnership (LP) offers all partners protection from claims by the LP's creditors.

Which of the following is not a specific adjustment to the partners' basis in the partnership interest?

In a limited liability company, all members are protected from all debts of the partnership unless they personally guaranteed the debt.

Match each of the following statements with the terms below that provide the best definition -Check the box regulations

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 -Limited partnership

Match each of the following statements with the terms below that provide the best definition -Disguised sale

If a partnership allocates losses to the partners, the partners must first apply the passive loss limitations, then the basis limitation, and finally the at-risk limitations. If all three hurdles are met, the partner may deduct the loss.

The taxable income of a partnership flows through to the partners, who report the income on their tax returns.

Blaine contributes property valued at $50,000 (basis of $40,000) in exchange for a 25% interest in the BIKE Partnership. If the property is later sold for $70,000, gain of $15,000 will be allocated to Blaine.

A partnership cannot use the cash method of accounting if one of the partners is a C corporation.

Which of the following statements is correct regarding the manner in which partnership liabilities are reflected in the partners' bases in their partnership interests?

Match each of the following statements with the terms below that provide the best definition -Guaranteed payment

Items that are not required to be shown on the partners' Schedules K-1 include AMT adjustments and preferences and taxes paid to foreign countries, as AMT and the foreign tax credit are calculated by the partnership.

ABC, LLC is equally-owned by three corporations. Two corporations have June 30 fiscal year ends, the third is a calendar-year taxpayer. ABC will use the least aggregate deferral method to determine its taxable year-end.

On a partnership's Form 1065, which of the following statements is not true?

A limited partnership (LP) offers all partners protection from claims by the LP's creditors.

Which of the following is not a specific adjustment to the partners' basis in the partnership interest?

In a limited liability company, all members are protected from all debts of the partnership unless they personally guaranteed the debt.

Match each of the following statements with the terms below that provide the best definition -Check the box regulations

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