FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 20: Forming and Operating Partnerships

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 1

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following items is subject to the net investment income tax when an individual partner is a material participant in the partnership?

A) Partner's distributive share of dividends.
B) Partner's distributive share of interest.
C) Partner's distributive share of ordinary business income.
D) Both partner's distributive share of dividends and partner's distributive share of interest.

E) B) and C)
F) A) and D)

Correct Answer

verified

D

Question 2

Essay

Review LaterAdd Note

Review Later

Explain why partners must increase their tax basis for their share of partnership taxable and nontaxable income or gain and reduce their basis by their share of partnership deductible and nondeductible expenses or losses.

Correct Answer

verified

A partner's tax basis must be adjusted t...

View Answer

Show Answer

Question 3

Multiple Choice

Review LaterAdd Note

Zinc,LP was formed on August 1,20X9.When the partnership was formed,Al contributed $10,000 in cash and inventory with an FMV and tax basis of $40,000.In addition,Bill contributed equipment with an FMV of $30,000 and adjusted basis of $25,000 along with accounts receivable with an FMV and tax basis of $20,000.Also,Chad contributed land with an FMV of $50,000 and tax basis of $35,000.Finally,Dave contributed a machine,secured by $35,000 of debt,with an FMV of $15,000 and a tax basis of $10,000.What is the total inside basis of all the assets contributed to Zinc,LP?

Any losses that exceed the tax basis of a partner in their partnership interest are suspended and carried forward for 20 years.

Which of the following does not represent a tax election available to either partners or partnerships?

Sue and Andrew form SA general partnership.Each person receives an equal interest in the newly created partnership.Sue contributes $10,000 of cash and land with an FMV of $55,000.Her basis in the land is $20,000.Andrew contributes equipment with an FMV of $12,000 and a building with an FMV of $33,000.His basis in the equipment is $8,000,and his basis in the building is $20,000.How much gain must the SA general partnership recognize on the transfer of these assets from Sue and Andrew?

Lloyd and Harry,equal partners,form the Ant World Partnership.During the year,Ant World had the following revenue,expenses,gains,losses,and distributions: Given these items,what amount of ordinary business income (loss)and what separately stated items should be allocated to each partner for the year?

On March 15,20X9,Troy,Peter,and Sarah formed Picture Perfect General Partnership.This partnership was created to sell a variety of cameras,picture frames,and other photography accessories.The following items were contributed by each partner in exchange for a one-third capital and profits interest: Troy-cash of $3,000,inventory with an FMV and tax basis $5,000,and a building with an FMV of $8,000 and adjusted basis of $10,000.Additionally,the building is secured by a $10,000 mortgage. Peter-cash of $5,000,accounts payable with an FMV and tax basis of $19,000,and land with an FMV and tax basis of $20,000. Sarah-cash of $2,000,accounts receivable with an FMV and tax basis of $1,000,and equipment with an FMV of $26,000 and adjusted basis of $4,000.Also,the equipment is secured by a $23,000 note payable. What is the partnership's inside basis in each asset? How much gain or loss must Picture Perfect recognize? Prepare Picture Perfect's balance sheet reflecting the partners' capital accounts on both a tax basis and 704(b)/FMV basis.

Which of the following statements is true when property is contributed in exchange for a partnership interest?

A partner's self-employment earnings (loss) may be affected by her share of ordinary business income (loss) and any guaranteed payments she receives.The impact of these amounts typically depends on the status of the partner.Which of the following statements correctly describes the effect these items have on the partner's self-employment earnings (loss) ?

Which of the following would not be classified as a material participant in an activity?

A purchased partnership interest has a holding period beginning on the date of purchase regardless of the type of property held by the partnership.

Which of the following does not adjust a partner's basis?

How does a partnership make a tax election for the current year?

Partnerships can use special allocations to shift built-in gains and built-in losses on contributed property from a partner who contributed the property to other partners.

Adjustments to a partner's outside basis are made annually to prevent double taxation on the sale of a partnership interest or at the time of a partnership distribution.

How does additional debt or relief of debt affect a partner's basis?

A general partner's share of ordinary business income is similar to investment income; thus,a general partner only includes their guaranteed payments as self-employment income.

What general accounting methods may be used by a partnership,and how and by whom are they selected?

On June 12,20X9,Kevin,Chris,and Candy Corp.came together to form Scrumptious Sweets General Partnership.Now,Scrumptious Sweets must decide which tax year-end to use.Kevin and Chris have calendar year-ends and each holds a 35 percent profits and capital interest.However,Candy Corp.has a September 30^th year-end and holds the remaining 30 percent profits and capital interest.What tax year-end must Scrumptious Sweets adopt,and what rule mandates this year-end?