Question 1

Identify which of the following statements is true.

Accepted Answer

A) The Hunter Partnership has a net long-term capital gain of $4,000 and a net short-term capital loss of $1,000 for the current tax year. The gain and loss will be netted and the partners will include their proportionate share of the $3,000 net long-term capital gain on their return. 
B) The Right Partnership sells a delivery truck and recognizes a gain of $2,000, which represents depreciation recaptured under Sec. 1245. The $2,000 gain will retain its identity as a separately stated item. 
C) For tax purposes, the partnership takes a carryover basis in the contributed property that references the contributing partner's basis. 
D) All of the above are false. 
A) The Hunter Partnership has a net long-term capital gain of $4,000 and a net short-term capital loss of $1,000 for the current tax year. The gain and loss will be netted and the partners will include their proportionate share of the $3,000 net long-term capital gain on their return. 
B) The Right Partnership sells a delivery truck and recognizes a gain of $2,000, which represents depreciation recaptured under Sec. 1245. The $2,000 gain will retain its identity as a separately stated item. 
C) For tax purposes, the partnership takes a carryover basis in the contributed property that references the contributing partner's basis. 
D) All of the above are false.

Question 2

Dan purchases a 25% interest in the Haymarket Partnership for $20,000 on January 1, and begins to materially participate in the partnership's business. The Haymarket Partnership uses the calendar year as its tax year. At the time of the purchase, the Haymarket Partnership has $2,000 in liabilities, and Dan's share is 25%. During the year, the Haymarket Partnership incurs $100,000 in losses and its liabilities increase by $4000. What is Dan's basis in his partnership interest on December 31?

Accepted Answer

@#IMG-DLM& Dan is allocated $25,000 (0.25 × $100,0

Question 3

The RT Limited Partnership incurs the following expenses during the time that the partnership is being organized:   What is the maximum amount that the partnership can deduct as an organization and syndication expense for the first year in which the partnership begins business, assuming the business began on October 1?

Accepted Answer

The attorneys' fees for drawing up the p

Question 4

Explain the three different limitation provisions that a partner must satisfy before a loss can be deducted.

Accepted Answer

In the order of application, t

Question 5

Briefly explain the aggregate and entity theories as they relate to partnerships.

Accepted Answer

The aggregate theory of partnerships hol

Question 6

Jason, a lawyer, provided legal services for the employees of the ABC Partnership during the first six months of the current year. In exchange, he received a 2% capital and profits interest in the partnership. The value of the interest is $5,000. What are the tax consequences to Jason, the ABC Partnership, and the employees of ABC?

Accepted Answer

Jason must include the $5,000 in his cur

Question 7

Explain the difference between partnership distributions and distributive shares.

Accepted Answer

Partnership distributions represent the

Question 8

The WE Partnership reports the following items for its current tax year:     What is the WE Partnership's ordinary income for the current year?

Accepted Answer

The income items, which are ordinary, to

Question 9

On the first day of the partnership's tax year, Karen purchases a 50% interest in a general partnership for $30,000 cash and she materially participates in the operation of the partnership for the entire year. The partnership has $40,000 in recourse liabilities when Karen enters the partnership. Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses. There is no minimum gain related to the nonrecourse liability. During the year, the partnership incurs a $120,000 loss and a $20,000 increase in liabilities. How much of the loss can Karen report on her tax return for the current year?

Accepted Answer

A) $30,000 
B) $40,000 
C) $50,000 
D) $60,000 
A) $30,000 
B) $40,000 
C) $50,000 
D) $60,000

Question 10

On December 31 of last year, Alex and Jackson become equal partners in the AJ Partnership with assets having a tax basis and FMV of $120,000. The partnership, which deals in securities, had no liabilities at the end of last year. In January of this year, Franklin contributes his investment securities with an FMV of $60,000 (purchased two years ago at a cost of $45,000)to become an equal partner in the new AJF Partnership. The securities, which are inventory to the partnership, are sold on December 15 of the current year for $90,000. What amount and character of gain from the sale of these securities should be allocated to Franklin?

Accepted Answer

A) $10,000 ordinary income 
B) $15,000 capital gain and $10,000 ordinary income 
C) $25,000 capital gain 
D) $25,000 ordinary income 
A) $10,000 ordinary income 
B) $15,000 capital gain and $10,000 ordinary income 
C) $25,000 capital gain 
D) $25,000 ordinary income

Question 11

Identify which of the following statements is true.

Accepted Answer

A) Bob gives his 16-year-old daughter Michelle a 20% capital and profits interest in his accounting practice. She does no work for the partnership and is not involved at all with the operations of the partnership. In fact, she does not know that her dad transferred the interest in the partnership to her. If the partnership allocates an $8,000 distributive share of ordinary income to her, it is properly reported on Michelle's individual tax return. 
B) Valid family partnership partners may be subject to the "kiddie tax." 
C) Joan gives her daughter, Sarah, a 25% interest in a partnership that operates a steel mill. Sarah, age 19, was allocated $20,000 from the partnership as her share of the partnership ordinary income. The IRS will require the income to be included on Sarah's return. 
D) All of the above are false. 
A) Bob gives his 16-year-old daughter Michelle a 20% capital and profits interest in his accounting practice. She does no work for the partnership and is not involved at all with the operations of the partnership. In fact, she does not know that her dad transferred the interest in the partnership to her. If the partnership allocates an $8,000 distributive share of ordinary income to her, it is properly reported on Michelle's individual tax return. 
B) Valid family partnership partners may be subject to the "kiddie tax." 
C) Joan gives her daughter, Sarah, a 25% interest in a partnership that operates a steel mill. Sarah, age 19, was allocated $20,000 from the partnership as her share of the partnership ordinary income. The IRS will require the income to be included on Sarah's return. 
D) All of the above are false.

Question 12

Meg and Abby are equal partners in the AM Partnership, which earns $40,000 ordinary income, $6,000 long-term capital gain (LTCG), and $2,000 Sec. 1231 loss during the current year. What is the amount and character of income that must be reported on Abby's tax return for this year's partnership operations?

Accepted Answer

A) $20,000 ordinary income, $3,000 LTCG, $1,000 Sec. 1231 loss 
B) $19,000 ordinary income, $3,000 LTCG 
C) $23,000 ordinary income, $1,000 Sec. 1231 loss 
D) $22,000 ordinary income 
A) $20,000 ordinary income, $3,000 LTCG, $1,000 Sec. 1231 loss 
B) $19,000 ordinary income, $3,000 LTCG 
C) $23,000 ordinary income, $1,000 Sec. 1231 loss 
D) $22,000 ordinary income

Question 13

A partner's share of nonrecourse debt increases that partner's share of basis.

Accepted Answer

A) True 
 B)False

Question 14

Identify which of the following statements is true.

Accepted Answer

A) Formation of a partnership requires legal documentation. 
B) An individual engaged in the active conduct of a business must elect not to be taxed as a partnership. 
C) A partnership exists as long as there are at least two individuals or entities engaged in the active conduct of a trade or business or a financial operation, and the business is not a trust or a corporation. 
D) All of the above are false. 
A) Formation of a partnership requires legal documentation. 
B) An individual engaged in the active conduct of a business must elect not to be taxed as a partnership. 
C) A partnership exists as long as there are at least two individuals or entities engaged in the active conduct of a trade or business or a financial operation, and the business is not a trust or a corporation. 
D) All of the above are false.

Question 15

The Troika Partnership has an ordinary loss of $48,000 for the year. Before allocation of the loss at the end of the year, Shaad's one-third limited partnership interest has an adjusted basis of $5,000. Shaad's only other income or loss is his $30,000 salary from a factory job. What amount can Shaad deduct on his tax return as his share of the partnership's loss?

Accepted Answer

Shaad's distributive share of loss is $1

Question 16

A partner's basis for his partnership interest can be negative.

Accepted Answer

A) True 
 B)False

Question 17

Samantha works 40 hours a week as a clerk in the mall and earns $28,000. In addition, she works five hours each week in the XYZ Partnership's office. Samantha, a 15% limited partner in the XYZ Partnership, has been allocated a $4,000 loss from the partnership for the current year. The basis for her interest in XYZ before accounting for current operations is $7,000. What tax issues should Samantha consider with respect to her interest in, and employment by, the XYZ Partnership?

Accepted Answer

• What is Samantha's deductible loss fro

Question 18

Jeremey is a partner in the Jimmy partnership. Why does he need to know his basis in his partnership interest?

Accepted Answer

Jeremey needs to know the basis of his p

Question 19

On December 1, Antonio, a member of a three-person partnership, purchases investment securities from the partnership for their $37,000 FMV. All partners share profits and losses equally. The securities were acquired by the partnership for $25,000 cash in March of the current year. What amount and character of gain will Antonio recognize because of this transaction?

Accepted Answer

A) $0 gain 
B) $4,000 ordinary income 
C) $4,000 short-term capital gain 
D) $12,000 ordinary income 
A) $0 gain 
B) $4,000 ordinary income 
C) $4,000 short-term capital gain 
D) $12,000 ordinary income

Question 20

Which of the following is false?

Accepted Answer

A) A large partnership must not be a service partnership. 
B) A large partnership must have fewer than 100 partners. 
C) A large partnership must not be engaged in commodity trading. 
D) A large partnership is subject to a different system of audits. 
A) A large partnership must not be a service partnership. 
B) A large partnership must have fewer than 100 partners. 
C) A large partnership must not be engaged in commodity trading. 
D) A large partnership is subject to a different system of audits.

Identify which of the following statements is true.

Explain the three different limitation provisions that a partner must satisfy before a loss can be deducted.

Briefly explain the aggregate and entity theories as they relate to partnerships.

Explain the difference between partnership distributions and distributive shares.

The WE Partnership reports the following items for its current tax year: What is the WE Partnership's ordinary income for the current year?

Identify which of the following statements is true.

A partner's share of nonrecourse debt increases that partner's share of basis.

Identify which of the following statements is true.

A partner's basis for his partnership interest can be negative.

Jeremey is a partner in the Jimmy partnership. Why does he need to know his basis in his partnership interest?

Which of the following is false?

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

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Exam 9: Partnership Formation and Operation

Identify which of the following statements is true.

Explain the three different limitation provisions that a partner must satisfy before a loss can be deducted.

Briefly explain the aggregate and entity theories as they relate to partnerships.

Explain the difference between partnership distributions and distributive shares.

The WE Partnership reports the following items for its current tax year: What is the WE Partnership's ordinary income for the current year?

Identify which of the following statements is true.

A partner's share of nonrecourse debt increases that partner's share of basis.

Identify which of the following statements is true.

A partner's basis for his partnership interest can be negative.

Jeremey is a partner in the Jimmy partnership. Why does he need to know his basis in his partnership interest?

Which of the following is false?

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters