Question 1

All of the following would reduce the basis of a shareholder's stock in an S corporation, except

Accepted Answer

A) a shareholder's pro rata share of nontaxable distributions by the S corporation to its shareholders. 
B) a shareholder's share of all loss and deduction items of the S corporation that are separately stated and passed through to the shareholder. 
C) a shareholder's pro rata share of any nondeductible expenses of the S corporation. 
D) a shareholder's pro rata share of loan repayments made by the S corporation.

Question 2

Ordinary losses and separately stated deduction and loss items that exceed a partner's basis carry over indefinitely until the partner has a positive partnership basis.

Accepted Answer

A) True 
 B)False

Question 3

Jamahl has a 65% interest in a partnership. Jamahl sells land to the partnership for $70,000. Prior to the sale, the land had a FMV of $70,000 and an adjusted basis of $90,000 to Jamahl. Due to the sale, Jamahl will recognize

Accepted Answer

A) a gain of $20,000. 
B) a loss of $20,000. 
C) $0, but he will have a carryover loss of $20,000. 
D) $0, and he will not have any carryover loss.

Question 4

Patrick acquired a 50% interest in a partnership by contributing property that had an adjusted basis of $8,000 and a fair market value of $29,000. The property was subject to a liability of $22,000, which the partnership assumed for legitimate business purposes. Which of the following statements is correct?

Accepted Answer

A) Patrick will be required to recognize a $3,000 gain due to the negative basis rules and will have a basis in his partnership interest of zero. 
B) Patrick will not be required to recognize a gain on his return and will have a basis in his partnership interest of negative $3,000. 
C) Patrick will be required to recognize a $21,000 gain due to the negative basis rules and will have a basis in his partnership interest of zero. 
D) Patrick will not be required to recognize a gain on his return but the realized gain will increase the basis of his partnership interest.

Question 5

Which of the following statements is correct, assuming that an extension is not requested?

Accepted Answer

A) A partnership must file Form 1065 no later than the 15th day of the fourth month after the close of the partnership's tax year. 
B) A partnership must file Form 1120 no later than the 15th day of the fourth month after the close of the partnership's tax year. 
C) A partnership must file Form 1065 no later than the 15th day of the third month after the close of the partnership's tax year. 
D) Partnerships must file Schedule K-1 to show how income is allocated to partners no later than the 15th day after the close of the partnership's tax year.

Question 6

Discuss the concept of partnership guaranteed payments.

Accepted Answer

The answer of Discuss the concept of partnership guaranteed payments....

Question 7

An S corporation may not have more than 75 shareholders.

Accepted Answer

A) True 
 B)False

Question 8

If partners having a majority interest in the partnership do not have the same tax year, the partnership uses the same tax year as all of its principal partners-those with 10% or greater interest in the partnership.

Accepted Answer

A) True 
 B)False

Question 9

An S corporation distributes land with a basis of $60,000 and a FMV of $90,000 to its shareholders. The tax results of the distribution will be

Accepted Answer

A) no gain to the corporation or to the shareholders. 
B) $30,000 of gain recognized by the S corporation and no pass through to the shareholders. 
C) no gain recognized by the corporation but $30,000 of gain recognized by the shareholders. 
D) $30,000 of gain recognized by the S corporation which is passed through to the shareholders.

Question 10

Joey and Bob each have 50% interest in a Partnership. Both Joey and the partnership file returns on a calendar year basis. Partnership Q had a $12,000 loss in 2014. Joey's adjusted basis in his partnership interest on January 1, 2014 was $5,000. In 2015, the partnership had a profit of $10,000. Assuming there were no other adjustments to Joey's basis in the partnership, what amount of partnership income (loss)should Joey show on his 2014 and 2015 individual income tax returns?

Accepted Answer

A)   
B)   
C)   
D)

Question 11

At the beginning of this year, Edmond and Samuel were equal partners in a partnership that uses the calendar year as its tax year. On October 1, this year, Joan contributed $48,000 cash for a one-third interest in the partnership. The interests of both Edmond and Samuel drop to one-third. The partnership reports a $36,000 ordinary loss for the current tax year ending December 31. The loss allocation to Samuel (one of the original partners)is

Accepted Answer

A) $12,000. 
B) $13,500. 
C) $16,500. 
D) $18,000.

Question 12

Guaranteed payments are not deductible by the partnership in arriving at partnership ordinary income but are included in the receiving partner's income.

Accepted Answer

A) True 
 B)False

Question 13

New business owners expecting losses in the early years will generally prefer the partnership (or LLC)form of business over the C and S corporation forms.

Accepted Answer

A) True 
 B)False

Question 14

Pass-through entities are taxed at only one level-the ownership level.

Accepted Answer

A) True 
 B)False

Question 15

All of the following are requirements to qualify as an S corporation with the exception of

Accepted Answer

A) the corporation must be a domestic corporation. 
B) the corporation may issue only one class of stock (disregarding voting rights). 
C) the corporation may not have more than 100 shareholders. 
D) the corporation shareholders may consist of only individuals, estates, trusts, and partnerships.

Question 16

Although a partner's distributive share of income, deductions, losses, and credits is generally determined by partnership agreement, special allocation provisions restrict the partners' freedom to shift some tax benefits among partners.

Accepted Answer

A) True 
 B)False

Question 17

Why are some partnership items separately stated?

Accepted Answer

The answer of Why are some partnership items separately stated?...

Question 18

Charlie Company is a partnership with two owners, Charlie and Robert. Each owner has a $20,000 original basis in the entity having contributed cash to the partnership at its formation. In the first year of operations, the partnership reported $50,000 of income which is allocated to each partner equally. The partnership has no liabilities. If Charlie sells his partnership interest to Jody for $55,000, what is the amount of gain or loss on the transaction?

Accepted Answer

The answer of Charlie Company is a partnership with two...

Question 19

George transferred land having a $170,000 FMV and a $60,000 adjusted basis, which is subject to a $150,000 mortgage in exchange for a one-third interest in the GEF Partnership. The partnership owes no other liabilities. George, Elena, and Franz share profits and losses equally and each has a one-third interest in partnership capital. The basis to the partnership of the land transferred by George is

Accepted Answer

A) $20,000. 
B) $60,000. 
C) $110,000. 
D) $170,000.

Question 20

Oliver receives a nonliquidating distribution of land having a $25,000 adjusted basis and a $32,000 FMV from the OK Partnership. At the time of the distribution, Oliver's basis in his partnership interest is $30,000.
a. What is the amount of recognized gain or loss on the distribution?
b. What is Oliver's basis in his partnership interest following the distribution?
c. What is Oliver's basis in the land?

Accepted Answer

The answer of Oliver receives a nonliquidating distribution of land...

Exam 17: Partnerships and S Corporations

All of the following would reduce the basis of a shareholder's stock in an S corporation, except

Ordinary losses and separately stated deduction and loss items that exceed a partner's basis carry over indefinitely until the partner has a positive partnership basis.

Jamahl has a 65% interest in a partnership. Jamahl sells land to the partnership for $70,000. Prior to the sale, the land had a FMV of $70,000 and an adjusted basis of $90,000 to Jamahl. Due to the sale, Jamahl will recognize

Which of the following statements is correct, assuming that an extension is not requested?

Discuss the concept of partnership guaranteed payments.

An S corporation may not have more than 75 shareholders.

If partners having a majority interest in the partnership do not have the same tax year, the partnership uses the same tax year as all of its principal partners-those with 10% or greater interest in the partnership.

An S corporation distributes land with a basis of $60,000 and a FMV of $90,000 to its shareholders. The tax results of the distribution will be

Guaranteed payments are not deductible by the partnership in arriving at partnership ordinary income but are included in the receiving partner's income.

New business owners expecting losses in the early years will generally prefer the partnership (or LLC)form of business over the C and S corporation forms.

Pass-through entities are taxed at only one level-the ownership level.

All of the following are requirements to qualify as an S corporation with the exception of

Although a partner's distributive share of income, deductions, losses, and credits is generally determined by partnership agreement, special allocation provisions restrict the partners' freedom to shift some tax benefits among partners.

Why are some partnership items separately stated?