Deck 18: Partnerships

Question 1

Describe three factors that have been used to distinguish joint venture arrangements from partnership arrangements.

Answer 1

Factors that could be listed here include:
• co-venturers contractually do not have the power to bind other co-venturers;
• co-venturers retain ownership of property contributed to the undertaking;
• co-venturers are not jointly and severally liable for debt of the undertaking;
• co-venturers share gross revenues, not profits; and
• while partnerships may be formed for the same purpose as a joint venture, they are usually of longer duration and involve more than a single undertaking.

Question 2

Describe the treatment of partnership taxable dividends received in the determination of a partner's Net Income For Tax Purposes and the adjusted cost base on his partnership interest. The partner is an individual.

Answer 2

The partner's share of the partnership dividends will be included in his Net Income For Tax Purposes in the year in which the dividends are received by the partnership. The partner will gross up the allocated amount and be entitled to a dividend credit against Tax Payable. The partner's share of the partnership dividends will be added to the adjusted cost base of his partnership interest on the first day of the following taxation year. This amount will not include the gross up.

Question 3

Briefly describe the three basic elements that are required in the formation of a partnership.

Answer 3

The three elements are:
1. There must be two or more persons (taxable entities)involved.
2. These persons must be carrying on a business.
3. The business must be carried on with a view to making a profit.

Question 4

In converting accounting business income to Net Business Income (for tax purposes), is there a need to make an adjustment for drawings?

Question 5

The degree to which partners have responsibility for partnership debts depends on the type of partnership. In terms of this responsibility, briefly describe the three types of partnerships that are discussed in your text.

Question 6

In determining the Net Business Income (for tax purposes)of a partnership, how are salaries to the partners dealt with?

Question 7

What are the rules for determining the taxation year of a partnership?

Question 8

Adjustments to the adjusted cost base of a partnership interest can sometimes result in a "negative" amount. What are the tax consequences of this to the partner?

Question 9

In determining the adjusted cost base of a partnership interest, briefly describe the treatment of each of the following items:
• capital contributions,
• partner's share of partnership Net Business Income, and
• partner's drawings.

Question 10

An individual wishes to become a member of an existing partnership. What are this individual's alternatives for acquiring this interest?

Question 11

The various types of income earned in a partnership retain their tax characteristics when allocated to the partners. Explain this statement.

Question 12

A member of a partnership, because of losses on other investments, would like to maximize his partnership income. To this end, he has asked that no CCA be deducted from his share of the partnership income. Should the other partners agree to this request?

Question 13

Partnership organizations sometimes make donations to registered charities. How are these amounts dealt with in the determination of Net Business Income (for tax purposes)at the partnership level?

Question 14

Describe the treatment of capital gains in the conversion of accounting net income to Net Business Income (for tax purposes)of a partnership.

Question 15

Under the provisions of the Income Tax Act, only individuals, corporations, and trusts are considered to be taxable entities. Given this, explain how the business income, capital gains, and property income earned by a partnership will be taxed.

Question 16

Mr. Johns, Mr. Klien, and Ms. Langley are all Chartered Professional Accountants who trained in large national firms. However, for the last few years they have each operated a small private practice. They are currently discussing the possibility of forming a partnership to combine their practices. List four major points to be considered in the formation of such a partnership and in drawing up a partnership agreement.

Question 17

If the partnership agreement does not specify how profits will be shared, how will the profit allocation be determined?

Question 18

Describe the treatment of partnership capital gains in the determination of a partner's Net Income For Tax Purposes and the adjusted cost base on his partnership interest.

Question 19

CCA can only be taken on property that is owned by the taxpayer. As a partnership is not a legal entity, it cannot own property. Does this mean that a partnership cannot deduct CCA in determining its income? Explain your conclusion.

Question 20

What is the basic difference between the tax procedures applicable to joint ventures and the tax procedures applicable to partnerships?

Question 21

If all of the members of a partnership are individuals, the partnership can use a non-calendar taxation year.

Question 22

In computing a partnership's Net Business Income (for tax purposes), the amount of CCA to be deducted would be calculated using the same rules that are applicable to a corporation.

Question 23

What is a "Canadian Partnership"? In terms of tax legislation, what is the importance of qualifying as a Canadian Partnership?

Question 24

When dividends received by a partnership are allocated to individual partners, these partners will gross up the amount received and be eligible for a dividend tax credit.

Question 25

In computing a partnership's Net Business Income (for tax purposes), salaries paid to the partners can only be deducted if they are reasonable.

Question 26

When a capital property is transferred from an existing partnership to a new partnership, any capital gain or recapture from the disposition will be recorded as income of the existing partnership.

Question 27

In computing a partnership's Net Business Income (for tax purposes), charitable donations made by the partnership should be deducted.

Question 28

When a partner is allocated political contributions made by the partnership, the amount will be deducted from the adjusted cost base of that partner.

Question 29

What is a limited partnership? Your answer should include the meaning of "limited partner".

Question 30

If a partnership pays interest to partners on their average capital contributions, the payments can be deducted in determining the net business income of the partnership.

Question 31

From the point of view of determining an individual's Tax Payable, it does not matter whether he is considered a partner or a joint venturer.

Question 32

If a partnership sells a depreciable asset and, as a result of the disposition, recapture is recorded, this will be included in the net business income that is allocated to the partners.

Question 33

Only one-half of any partnership capital gains that are allocated to partners will be added to the partner's adjusted cost base.

Question 34

Briefly describe the procedures required to incorporate a partnership without incurring any current Tax Payable.

Question 35

What is the objective of the "at-risk" rules that are applicable to limited partnerships?

Question 36

A partnership is not a taxable entity, either for income tax purposes or for GST/HST purposes.

Question 37

Income that is flowed through a partnership into the hands of the partners will retain its tax characteristics (e.g., the partnership's capital gains will be passed to the partners as capital gains).

Question 38

In determining the at-risk amount for a partner, positive amounts of partnership income allocations for the year are added to the opening balance of the partner's adjusted cost base.

Question 39

Which of the following statements is correct with respect to partnerships?

A)At least one of the partners must be an individual.
B)Limited partners cannot participate in the management of the partnership.
C)Partnerships are not required to have an expectation of profit.
D)The use of the partnership form of business will allow the partners to pay higher salaries to family members.

Question 40

While only one-half of partnership capital gains will be included in the Net Income For Tax Purposes of a partner, 100 percent of such gains will be added to the adjusted cost base of the partner's partnership interest.

Question 41

Femi and Fola are sisters who are partners in the Double F Partnership, each holding a 50 percent interest. They wish to bring their brother, Faraji into the partnership on January 1, 2020, with a 20% interest. Faraji will pay $15,000 to each of his sisters in order to purchase 20% of each of their 50% interests. On January 1, 2020, Femi and Fola each have capital accounts with a balance of $50,000, which is equal to their adjusted cost base. Which of the following statements describes the tax consequences to Femi and Fola of admitting their brother to the partnership?

A)Each sister will have a taxable capital gain of $2,500.
B)Each sister will have their capital account balance and adjusted cost base reduced to $35,000.
C)Each sister will have a taxable capital gain of $7,500.
D)There will be no tax consequences to the two sisters.

Question 42

Which of the following statements regarding partnerships and joint ventures is correct?

A)Joint ventures are taxable entities for both income tax and GST/HST purposes.
B)Both partners and joint venturers have the ability to contractually bind other partners and joint venturers.
C)For both partnerships and joint ventures, all participants must use the same CCA figure for the current year.
D)Partners share the profit of the partnership and joint venturers share the gross revenues of the joint venture.

Question 43

Which of the following statements is NOT correct with respect to partnerships?

A)General partners are entitled to participate in the management of the company.
B)General partners are a separate legal entity from the business.
C)Unless the partnership agreement states otherwise, general partners are entitled to an equal share of the profits of the business.
D)General partners are jointly and severally liable for the debts of the company.

Question 44

What advantage is offered by a general partnership, as compared to a corporation, as a form of business organization?

A)Partners may be able to reduce their personal income taxes if the business has losses in the start-up years.
B)Higher salaries can be paid to family members and claimed as an expense.
C)Creditors cannot seize a partner's personal assets to cover business obligations.
D)Partners will be able to defer taxes on income that is left within the partnership.

Question 45

Ms. Sarah McLean has a 50 percent interest in a partnership that was acquired on January 1, 2020 at a cost of $40,000. The partnership's Net Business Income (for tax purposes)for the taxation year ending December 31, 2020 was $50,000, a figure that included a CCA deduction of $36,000. The 2020 Net Business Income figure did not include taxable capital gains of $10,000 realized by the partnership. During 2020, Ms. McLean withdrew $15,000 from the partnership. The adjusted cost base of Ms. McLean's partnership interest at January 1, 2021 is:

A)$55,000.
B)$88,000.
C)$50,000.
D)$60,000.

Question 46

A group of unrelated insurance companies combine forces to underwrite a very high-risk insurance policy. What type of arrangement would this collaboration be most likely to be?

A)A partnership.
B)A co-ownership.
C)A joint venture.
D)A syndicate.

Question 47

Which one of the following statements related to partnerships is NOT correct?

A)Dividends received by a partnership are not grossed up by the partnership in the calculation of partnership income.
B)Charitable donations made by a partnership are not deductible by the partnership.
C)Business losses of a partnership cannot be allocated to the partners for them to deduct against other sources of income.
D)Salaries to partners are not deductible by the partnership in the computation of partnership income.

Question 48

Which of the following is NOT a basic feature required to create a partnership?

A)One of the partners must be an individual.
B)There must be two or more persons involved.
C)The persons must be carrying on a business.
D)The business must be carried on with an expectation of a profit.

Question 49

Mr. Poulet is a partner in a partnership with a December 31 year end. Mr. Poulet's share of the partnership allocations for 2020 are as follows: • business income of $120,000
• charitable donations of $1,500
• partnership draws totalling $100,000
Mr) Poulet's partnership interest had an adjusted cost base on January 1, 2020 of $222,000. What is the adjusted cost base on January 1, 2021?

A)$120,500
B)$240,500
C)$242,000
D)$243,500

Question 50

A joint venture might be recognized because it would demonstrate one of the following factors. Which one?

A)The joint venture will own all property that co-venturers have contributed to the venture.
B)Co-venturers are jointly and severally liable for activities of the undertaking.
C)Co-venturers share profits not gross revenues.
D)Co-venturers do not have the power to bind other co-venturers contractually.

Question 51

Martin Aggerwal has a 30 percent interest in a partnership. During the current year, the partnership realized capital gains of $42,000, received non-eligible dividends of $15,000, and made charitable donations of $6,000. Martin has made no charitable donations personally. He has no income that will be taxed at 33 percent at the federal level. Which of the following statements is correct?

A)Martin will report taxable capital gains of $6,300, will have a federal dividend tax credit of $467, and a charitable donations tax credit of $494.
B)Martin will report taxable capital gains of $12,600, will have a federal dividend tax credit of $467, and a charitable donations tax credit of $522.
C)Martin will report taxable capital gains of $6,300, will have a federal dividend tax credit of $933, and a charitable donations tax credit of $494.
D)Martin will report taxable capital gains of $6,300, will have a federal dividend tax credit of $467, and a charitable donations tax credit of $522.

Question 52

The Bartlo Partnership has income for the year ending December 31, 2020 of $490,000. As per the partnership agreement, this amount has been determined under generally accepted accounting principles. The agreement also calls for each of the two partners to have an equal share in this income. The following amounts are included in the calculation of this income figure: • Non-eligible dividends received of $32,000
• Gains on the sale of shares of $96,000
• Charitable donations of $12,000
• Amortization on equipment of $49,000 (equal to CCA)
The two partners will each have Taxable Income for the 2020 taxation year of:

A)$227,000.
B)$229,400.
C)$223,400.
D)$245,000.

Question 53

Jacques is a member of a partnership that had a Net Business Income for tax purposes of $456,000 during the current year. His share of this income is $228,000. During this year, Jacques received monthly salary from the partnership that totalled $156,000 for the year. At the end of the year, the partnership distributed bonuses of $90,000 to each of the partners. How much income from the partnership should Jacques report for the current year?

A)$156,000.
B)$228,000.
C)$246,000.
D)$474,000.

Question 54

Joe Conners is a member of a partnership with a December 31 year end. Joe's share of the 2020 partnership allocations was as follows: • Net Business Loss For Tax Purposes of $25,000.
• Charitable Donations of $1,000.
Joe took drawings totalling $10,000 from the partnership during 2020. Joe's adjusted cost base (ACB)at January 1, 2020 was $59,000. What is the ACB of Joe's partnership interest at January 1, 2021?

A)$23,000.
B)$24,000.
C)$25,000.
D)$33,000.

Question 55

Which of the following statements about limited partners is NOT correct?

A)They are entitled to share equally in profits and losses, unless there is an agreement to the contrary.
B)They are jointly and severally liable for partnership debt and wrongful acts of other partners.
C)They are not responsible for the wrongful acts of other partners, except to the extent of their actual and promised contributions to the partnership.
D)Property that they contribute to the partnership is considered partnership property.

Question 56

The Keisha Partnership has determined that business income for the 2020 taxation year was $130,000. Ms. Kerry holds a 50% interest in the partnership. Her drawings from the partnership during 2020 totalled $45,000. In addition, Ms. Kerry has made the following business related expenditures from her own funds outside the partnership: meals and entertainment costs of $5,000; business related automobile costs of $3,500; charitable donations of $3,000. How much business income will Ms. Kerry report on her 2020 tax return?

A)$45,000
B)$56,000
C)$59,000
D)$65,000

Question 57

Christine would like to calculate the adjusted cost base of her partnership interest. She should include all of the following factors in her calculations except:

A)her share of the capital gains which the partnership realized during the year.
B)her share of the political contributions made during the year by the partnership.
C)her share of the business loss that accrued to the partnership during the year.
D)her share of the dividend gross up on dividends received by the partnership during the year.

Question 58

Jesse and Harold decide to form a partnership. They believe that this arrangement will have the following advantages: 1. They may be able to reduce their personal income taxes during the start-up years.
2) They may be able to split income with family members who are employed by the business.
3) They may be able to realize a tax deferral on their business income.
4) They will have limited personal liability for the debts of the business.
All of these statements are correct except:

A)1 and 3.
B)2 only.
C)3 and 4.
D)1 and 2.

Question 59

The distinguishing factor that makes an arrangement a co-ownership as opposed to a partnership would be:

A)when profits or losses are accounted for individually.
B)when profits or losses are split equally.
C)when participants do not have the power to bind other participants.
D)when gross revenue is shared, rather than profits.

Question 60

Jabari becomes a 40% interest partner in an accounting partnership on January 1, 2020. During the year ended December 31, 2020, the business earns income of $200,000 for accounting purposes. In arriving at this income figure, the bookkeeper deducted meals and entertainment costs of $20,000, and a charitable donation of $5,000. Jabari withdraws $50,000 from the partnership during 2020. As of January 1, 2021, his adjusted cost base will have increased by:

A)$30,000.
B)$38,000.
C)$34,000.
D)$24,000.

Question 61

Aba has just become a partner of the Thursday Partnership. She has a pick up truck which previously used in her own gardening business, and which would be useful to the partnership, and as her initial capital contribution, she transfers the truck to the partnership. The truck cost her $45,000, has a UCC of $28,000 and a fair market value of $35,000. The other partner can only contribute cash of $30,000, so the partnership pays Aba $5,000 in cash to keep the initial contributions equal. What are the tax consequences of this transaction?

A)Aba will have disposed of the truck for $35,000 resulting in recapture. • The adjusted cost base of her partnership interest will be $35,000.
• The partnership will have acquired the truck for $35,000.
B)Aba will have disposed of the truck for $30,000 resulting in recapture. • The adjusted cost base of her partnership interest will be $30,000.
• The partnership will have acquired the truck for $30,000.
C)Aba will have disposed of the truck for $35,000 resulting in recapture. • The adjusted cost base of her partnership interest will be $30,000.
• The partnership will have acquired the truck for $35,000.
D)Aba will have disposed of the truck for $30,000 resulting in recapture. • The adjusted cost base of her partnership interest will be $35,000.
• The partnership will have acquired the truck for $30,000.

Question 62

Which of the following assets can be transferred by a partner to a Canadian partnership under ITA 85(2), but cannot be transferred to a Canadian corporation under ITA 85(1)?

A)Inventory of goods for resale.
B)Vacant land.
C)Inventory of real property.
D)Non-depreciable property which has declined in value since being purchased.

Question 63

What restrictions apply to a limited partnership loss?

A)It can be carried forward for 5 years, and back for 3 years, and can be used against any type of income.
B)It has an indefinite carry forward period, cannot be carried back, and can only be used against limited partnership income from the same limited partnership.
C)It can be carried forward indefinitely, and back for 3 years, and can only be used against limited partnership income from the same limited partnership.
D)It has an indefinite carry forward period, cannot be carried back, and can only be used against partnership income.

Question 64

Aissa has just become a partner of the Gratitude Partnership. She has some vacant land that is in a perfect location for a building the partnership wants to construct. As her initial capital contribution, she transfers the land to the partnership. The land cost her $45,000 and has a fair market value of $95,000. No consideration is received from the partnership. What are the tax consequences of this transaction?

A)Aissa will have disposed of the land for its original cost of $45,000. • The adjusted cost base of her partnership interest will be $45,000.
• The partnership will have acquired the land for $45,000.
B)Aissa will have disposed of the land for $95,000 resulting in a taxable capital gain of $25,000. • The adjusted cost base of her partnership interest will be $95,000.
• The partnership will have acquired the land for $95,000.
C)Aissa will have disposed of the land for $95,000 resulting in a taxable capital gain of $25,000. • The adjusted cost base of her partnership interest will be $70,000.
• The partnership will have acquired the land for $70,000.
D)Aissa will have disposed of the land for $45,000. • The adjusted cost base of her partnership interest will be $95,000.
• The partnership will be considered to have acquired the land for $95,000.

Question 65

With respect to limited partnerships, the purpose of the at-risk rules is:

A)to ensure that the general partner is protected from putting all assets at-risk to cover partnership losses.
B)to ensure that general partners will have the ability to obtain financing from limited liability investors by ensuring limited liability investors know how much is at-risk.
C)to ensure that the tax deductions available to limited partners do not exceed the amount they have at-risk.
D)to ensure that the tax deductions available to limited partners are sufficient to reward investors for putting their funds at-risk.

Question 66

James Bonner is one of four brothers who have formed a partnership. They each have a 25 percent interest in the partnership.
During the year ending December 31, 2020, the partnership has the following sources of income: During 2020, James withdraws $15,000 in cash from the partnership.
Determine the tax consequences for James for the 2020 taxation year.

Question 67

A partnership interest was sold for $65,000. The adjusted cost base of the partnership interest was negative $8,000. Expenses of disposition were $2,000. What is the taxable capital gain realized on the sale?

A)$27,500
B)$34,500
C)$35,500
D)$36,500

Question 68

Red Bush and Green Tree are equal partners in Arbor Partnership. Each partner has contributed capital of $60,000 to the partnership and this is also their adjusted cost base for the partnership interest. Blue Grass will join the partnership as an equal partner. Which of the following statements is correct?

A)Blue Grass will pay $20,000 directly to each of the original partners and the adjusted cost base of the partnership interest of Red Bush and Green Tree will decrease by $20,000 each.
B)Blue Grass will pay $30,000 directly to each of the original partners and the adjusted cost base of the partnership interest of Red Bush and Green Tree will decrease by $30,000 each.
C)Blue Grass will pay $40,000 directly to the partnership and the adjusted cost base of the partnership interest of Red Bush and Green Tree will increase by $20,000 each.
D)Blue Grass will pay $40,000 directly to the partnership and the adjusted cost base of the partnership interest of Red Bush and Green Tree will decrease by $20,000 each.

Question 69

Arnold is a partner in the Polar Partnership. He has some vacant land that is in a perfect location for a building the partnership wants to construct. He transfers the land to the partnership in exchange for $155,000 in cash. The land cost him $95,000 and has a fair market value of $140,000. What is the effect on the adjusted cost base of his partnership interest?

A)An increase of $155,000.
B)A decrease of $15,000.
C)An increase of $15,000.
D)A decrease of $60,000.

Question 70

Which one of the following items does NOT affect the calculation of the adjusted cost base of a partnership interest?

A)The non-allowable portion of a capital loss on the sale of a partnership asset.
B)Dividends received by the partnership.
C)Interest on funds borrowed by a partner to make a capital contribution.
D)A charitable donation made by the partnership.

Question 71

During the year ending December 31, 2020, WIN Partnership has business income of $80,000, capital gains of $23,000, and receives eligible dividends of $8,500. Sally Winters has a 40 percent interest in the income of this partnership. During 2020, Sally withdraws $25,000 from the partnership.
Determine the tax consequences for Ms. Winters for the 2020 taxation year.

Question 72

Which of the following statements best reflects the objective of the at-risk rules?

A)The objective of the rules is to encourage investment in high-risk ventures.
B)The objective of the rules is to prevent taxpayers from receiving tax deductions or tax credits in excess of the amount that they are in a position to lose on their investment.
C)The objective of the rules is to protect investors from the losses they can incur on their investments in high risk partnerships.
D)The objective of the rules is to discourage investment in high-risk ventures.

Question 73

Red Bush and Green Tree are equal partners in Arbor Partnership. Each partner has contributed capital of $60,000 to the partnership and this is also their adjusted cost base for the partnership interest. Blue Grass wants to join the partnership as an equal partner. Both Red Bush and Green Tree have capital losses and would like to generate a capital gain from the admission of Blue Grass. Which of the following alternatives will accomplish both objectives?

A)Blue Grass pays $20,000 directly to both of the original partners.
B)Blue Grass pays $30,000 directly to both of the original partners.
C)Blue Grass pays $40,000 directly to the partnership.
D)Blue Grass pays $60,000 directly to the partnership.

Question 74

The MP Partnership has two partners who share all types of income on an equal basis. Partners M and P are both individuals. The Partnership's accounting Net Income for the year ending December 31, 2020 is $78,000. No salaries or interest payments to partners have been included in this calculation. However, the $78,000 includes $6,500 in eligible dividends, as well as a $16,000 gain on the sale of unused land. Amortization Expense deducted is equal to maximum CCA.
Determine the amounts that will be included in the Net Income For Tax Purposes of Partner M and Partner P for the year ending December 31, 2020.

Question 75

The Happy Endings Partnership transfers a piece of land to Chata, a partner with a 35 percent interest in the partnership. The land has an adjusted cost base of $62,000 and a fair market value of $88,000. What will the effect of this be on the adjusted cost base of Chata's partnership interest?

A)A decrease of $62,000.
B)A decrease of $78,900.
C)A decrease of $83,450.
D)A decrease of $88,000.

Question 76

On January 1, 2020, Barry Score acquires a 25 percent interest in a limited partnership for $200,000. Barry pays an immediate deposit of $50,000 with the balance due in 2022. For the year ending December 31, 2020, the partnership determines that it has a $40,000 capital gain and a $100,000 business loss. What is Barry's at-risk amount?

A)$30,000.
B)$200,000.
C)$60,000.
D)$55,000.

Question 77

The ID Partnership has two partners. Partner I, because he is actively managing the partnership, receives an annual salary of $42,000. Because Partner D has contributed most of the capital for the business, he receives an interest allocation of $17,000. The partnership agreement calls for the remaining profits, and all other allocations, to be split 55 percent to I and 45 percent to D. The salary and interest amounts are deducted in the determination of accounting Net Income and withdrawn by the partners during the year.
During the taxation year ending December 31, 2020, the partnership's accounting Net Income is $312,000. Other relevant information is as follows:
• The accountant deducted amortization charges of $41,000. Maximum CCA is $63,000.
• Accounting Net Income includes a deduction for charitable donations of $4,200.
• Accounting Net Income includes a gain on the sale of land of $31,000.
Determine the amounts of Net Business Income that will be allocated to Partner I and Partner D for the year ending December 31, 2020.

Question 78

A wealthy individual invests $250,000 in a limited partnership. The partnership is doing research in a new medical field and will have large losses for at least 3 years. It is a high risk investment as the research may completely fail to produce results, but could have large returns if successful. Which of the following statements is NOT correct?

A)He can write off the partnership losses against his taxable capital gains.
B)He can write off the partnership losses against his employment income.
C)His limited partnership loss can be carried forward indefinitely and carried back 3 years.
D)His deductible partnership losses will be limited to $250,000.

Question 79

Kasinda is a partner in Twins Partnership. At January 1, 2020, her 25% partnership interest has an adjusted cost base of $35,000. During 2020, she withdraws $85,000 from the partnership. During 2020, the partnership has business income for tax purposes of $400,000. What is her adjusted cost base on December 31, 2020, and what tax consequences will result from the transactions during the year?

A)The adjusted cost base on December 31, 2020 is nil. Because Kasinda has withdrawn more than her adjusted cost base from the partnership, she will report a taxable capital gain of $25,000. Her partnership business income is $100,000.
B)The adjusted cost base on December 31, 2020 is $50,000. Kasinda will report partnership business income of $100,000.
C)The adjusted cost base on December 31, 2020 is nil. Kasinda will report partnership business income of $100,000.
D)The adjusted cost base on December 31, 2020 is negative $50,000. Because Kasinda has withdrawn more than her adjusted cost base from the partnership, she will report partnership business income of $50,000.

Question 80

Which of the following partners is NOT a limited partner?

A)Mayumi, a partner in an engineering firm, entitled to 50% of the profits and responsible for 50% of losses.
B)Guan, a partner in an accounting firm with a guarantee that his partnership interest will be purchased by the other partners for a guaranteed minimum price of $150,000.
C)Ekatarina, a partner in a law firm who is only responsible for the first $50,000 of partnership losses.
D)Danyal, a partner in a construction company, who is reimbursed for any partnership losses by one of the other partners.