Exam 10: Partnerships: Formation, Operation, and Basis

Marissa and Noreen formed the MNO Partnership four years ago.Because they decided the company needed some expertise in computer networking, they offered Olivia 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 $75,000) was transferred to Olivia.How should Olivia treat the receipt of the partnership interest in the current year?

Shanna is a partner in the Fern Partnership, which is not publicly traded.Her allocable share of Fern's passive ordinary losses from a nonrealty activity for the current year is ($200,000).Shanna has a $140,000 adjusted basis (outside basis) for her interest in Fern (before deduction of any of the passive losses).Her amount "at risk" under § 465 is $110,000 (before deduction of any of the passive losses).She also has $75,000 of passive income from other sources.How much of the $200,000 passive loss allocated to her can Shanna deduct on her current year's tax return?

In the current year, Stephanie formed an equal partnership with Jane.Stephanie contributed land with an adjusted basis of $250,000 and a fair market value of $350,000.Stephanie also contributed $100,000 cash to the partnership.Jane contributed land with an adjusted basis of $150,000 and a fair market value of $200,000.The land contributed by Stephanie was encumbered by a $250,000 nonrecourse debt.Assume the partners share debt equally.Immediately after the formation, the basis of Stephanie's partnership interest is:

Cheryl and Joseph formed a partnership.Cheryl received a 50% interest in partnership capital and profits in exchange for contributing land with a basis of $140,000 and a fair market value of $300,000.Joseph received a 50% interest in partnership capital and profits in exchange for contributing $300,000 of cash.Three years after the contribution date, the land contributed by Cheryl is sold by the partnership to a third party for $380,000.How much taxable gain will Cheryl recognize from the sale?

Roberta and Donald do business as the RD Partnership, sharing profits and losses equally.Donald is a material participant in the partnership, and the partnership has no outstanding debt.All parties use the calendar year for tax purposes.On January 1 of the current year, Donald's basis in the partnership was $150,000; he made no withdrawals from the partnership during the year.The partnership sustained an operating loss of $500,000 in the current year.Donald's personal income tax return for the current year should include:

Benson contributed $60,000 of cash in exchange for a 50% interest in the Palm partnership capital and profits.During the first year of partnership operations, Palm had net taxable income of $80,000.In addition Benson received a $20,000 distribution of cash from the partnership and he has a 50% share in the $26,000 of partnership recourse liabilities on the last day of the partnership year.Benson's adjusted basis (outside basis) for his partnership interest at year-end is:

In the current year, Jessie formed an equal partnership with Beatrice.Jessie contributed land with an adjusted basis of $80,000 and a fair market value of $135,000.Jessie also contributed $75,000 cash to the partnership.Beatrice contributed land with an adjusted basis of $125,000 and a fair market value of $130,000.The land contributed by Jessie was encumbered by a $80,000 nonrecourse debt.Assume the partners share debt equally.Immediately after the formation, the basis of Jessie's partnership interest is:

Olivia and Paul formed the OP Partnership.Olivia contributed $50,000 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 net taxable income of $70,000; Olivia received a distribution of $17,000 cash from the partnership; and she had a 50% share in the $40,000 of partnership recourse liabilities on the last day of the partnership year.Olivia's adjusted basis for her partnership interest at year-end is:

Abby contributed property with a $80,000 basis and fair market value of $120,000 to the ABC Partnership in exchange for a 50% interest in partnership capital and profits.During the first year of partnership operations, ABC had net taxable income of $60,000 and tax-exempt income of $56,000.The partnership distributed $24,000 cash to Abby.Her share of partnership recourse liabilities on the last day of the partnership year was $32,000.Abby's adjusted basis (outside basis) for her partnership interest at year-end is:

Nanette and Noreen formed the NN Partnership.Nanette contributed $50,000 of cash in exchange for her 50% interest in the partnership capital and profits.Noreen contributed property with an adjusted basis of $25,000 and a fair market value of $50,000 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 $120,000; Nanette received a distribution of $16,000 cash from the partnership; and she had a 50% share in the $80,000 of partnership recourse liabilities on the last day of the partnership year.Nanette's adjusted basis for her partnership interest at year-end is: