* LVL 5 Partnership Cards

Strom acquired a 25% interest in Ace Partnership by contributing land having an adjusted basis of $16,000 and a fair market value of $50,000. The land was subject to a $24,000 recourse mortgage, which was assumed by Ace. No other liabilities existed at th

A) $0

The holding period of a partnership interest acquired in exchange for a contributed capital asset begins on the date
A) The partner is admitted to the partnership.
B) The partner transfers the asset to the partnership.
C) The partner's holding period of t

C) The partner's holding period of the capital asset began.

Which of the following should be used in computing the basis of a partner's interest acquired from another partner?
I. Cash Paid by Transferee to Transferor
II. Transferee's Share of Partnership Liabilities
A) I: No II: Yes
B) I: Yes II: No
C) I: No II: N

D) I: Yes II: Yes

In the current year, which taxable year may a newly formed partnership not adopt without obtaining prior approval from the IRS?
A) A taxable year that is the same as that of its majority partners.
B) A least aggregate deferral year end if majority partner

C) A January 31 year end if it is a retail enterprise with a natural business year ending January 31 and all of its majority and principal partners are on a calendar year.

On June 1, 2019, Kelly received a 10% interest in Rock Co., a partnership, for services contributed to the partnership. Rock's net assets at that date had a basis of $70,000 and a fair market value of $100,000. In Kelly's 2019 income tax return, what amou

C) $10,000 ordinary income.

The holding period of property acquired by a partnership as a contribution to the contributing partner's capital account
A) Begins with the date of contribution to the partnership.
B) Includes the period during which the property was held by the contribut

B) Includes the period during which the property was held by the contributing partner.

On January 2, 2019, Arch and Bean contribute cash equally to form the JK Partnership. Arch and Bean share profits and losses in a ratio of 75% to 25%, respectively. For 2019, the partnership's ordinary income was $40,000. A distribution of $5,000 was made

D) $30,000

Molloy contributed $40,000 in cash in exchange for a one-third interest in the RST Partnership. In the first year of partnership operations, RST had taxable income of $60,000. In addition, Molloy received a $5,000 distribution of cash and, at the end of t

B) $61,000

Evan, a 25% partner in Vista Partnership, received a $20,000 guaranteed payment in 2019 for deductible services rendered to the partnership. Guaranteed payments were not made to any other partner. Vista's 2019 partnership income consisted of
Net business

A) $37,500

Last year, Jim, one of two equal partners, contributed land with a basis to him of $15,000 and a fair market value of $10,000 to the partnership of which he was a member. His capital account was credited for $10,000. The land was later sold for $8,000. As

D) $6,000 loss.

Dunn and Shaw are partners who share profits and losses equally. In the computation of the partnership's 2019 book income of $100,000, guaranteed payments to partners totaling $60,000 and charitable contributions totaling $1,000 were treated as expenses.

B) $101,000

Clark and Lewis share profits and losses of 60% and 40%, respectively. The tax basis of each partner's interest in the partnership as of December 31, 2018, was as follows:
Clark $24,000
Lewis $18,000
During 2019, the partnership had ordinary income of $50

B) $34,000

At December 31, 2018, Burns and Cooper were equal partners in a partnership with net assets having a tax basis and fair market value of $100,000. On January 1, 2019, Todd contributed securities with a fair market value of $50,000 (purchased in 2017 at a c

D) $20,000

Hot assets" of a partnership would include which of the following?
A) Cash.
B) Unrealized receivables.
C) Section 1231 assets.
D) Capital assets.

B) Unrealized receivables.

A, B, and C formed a calendar-year partnership. Profits and losses are to be shared equally. A contributed a building to be used in the business that had an adjusted basis to A of $100,000 and a fair market value of $130,000. The partnership also assumed

C) $100,000

Peterson has a one-third interest in the Spano Partnership. During 2019, Peterson received a $16,000 guaranteed payment, which was deductible by the partnership, for services rendered to Spano. Spano reported a 2019 operating loss of $70,000 before the gu

B) II only.

Under the Internal Revenue Code sections pertaining to partnerships, guaranteed payments are payments to partners for
A) Payments of principal on secured notes honored at maturity.
B) Timely payments of periodic interest on bona fide loans that are not tr

C) Services or the use of capital without regard to partnership income.

A guaranteed payment by a partnership to a partner for services rendered may include an agreement to pay
I. A salary of $5,000 monthly without regard to partnership income
II. A 25% interest in partnership profits
A) I only.
B) II only.
C) Both I and II.

A) I only.

A $100,000 increase in partnership liabilities is treated in which of the following ways?
A) Increases each partner's basis in the partnership by $100,000.
B) Increases the partners' bases only if the liability is nonrecourse.
C) Increases each partner's

C) Increases each partner's basis in proportion to their ownership.

Beck and Nilo are equal partners in B&N Associates, a general partnership. B&N borrowed $10,000 from a bank on an unsecured note, thereby increasing each partner's share of partnership liabilities. As a result of this loan, the basis of each partner's int

A) Increased.

At the beginning of 2019, Paul owned a 25% interest in Associates Partnership. During the year, a new partner was admitted, and Paul's interest was reduced to 20%. The partnership liabilities at January 1, 2019, were $150,000 but decreased to $100,000 at

C) Decreased by $17,500.

PDK, LLC, had three members with equal ownership percentages. PDK elected to be treated as a partnership. For the tax year ending December 31, Year 1, PDK had the following income and expense items:
Revenues $120,000
Interest income 6,000
Gain on sale of

B) $35,000

Kline and Salomon form the KS Partnership as 50/50 partners. Kline contributes equipment that has a fair market value of $60,000 and an adjusted basis of $45,000. In addition, the equipment is subject to a $10,000 loan that KS Partnership is assuming. Wha

B) $40,000

On January 4, 2019, Smith and White contributed $4,000 and $6,000 in cash, respectively, and formed the Macro General Partnership. The partnership agreement allocated profits and losses 40% to Smith and 60% to White. In 2019, Macro purchased property from

A) Increases Smith's partnership basis by $16,000.

When a partner's share of partnership liabilities increases, the partner's basis in the partnership
A) Increases by the partner's share of the increase.
B) Decreases by the partner's share of the increase.
C) Decreases, but not below zero.
D) Is not affec

A) Increases by the partner's share of the increase.

David and Mark both contributed $100,000 on January 1, 2019, to form DM Limited Partnership. David is a general partner, and Mark is a limited partner. The partnership agreement provided that David would bear any risk of loss and profits would be shared e

B) Increases David's partnership basis by $300,000.

In return for a 20% partnership interest, Kathy contributed land having a $60,000 fair market value and a $30,000 basis to the partnership. The partnership assumes Kathy's $15,000 liability arising from her purchase of the land. The partnership's liabilit

A) $18,800

At the beginning of 2019, Paul owned a 25% interest in Associates Partnership. During the year, a new partner was admitted, and Paul's interest was reduced to 20%. The partnership liabilities at January 1, 2019, were $150,000 but decreased to $100,000 at

C) Decreased by $17,500.

Zachary invested $20,000 for a 30% interest in RST Partnership in the current year. At the same time, Andrea contributed property with a fair market value of $30,000, subject to a $10,000 liability (which the partnership assumed) for a 30% interest. Zacha

C) $19,000

PDK, LLC, had three members with equal ownership percentages. PDK elected to be treated as a partnership. For the tax year ending December 31, Year 1, PDK had the following income and expense items:
Revenues $120,000
Interest income 6,000
Gain on sale of

B) $35,000

Kline and Salomon form the KS Partnership as 50/50 partners. Kline contributes equipment that has a fair market value of $60,000 and an adjusted basis of $45,000. In addition, the equipment is subject to a $10,000 loan that KS Partnership is assuming. Wha

B) $40,000

Bill and Ted form a partnership with cash contributions of $40,000 each. Bill is a limited partner. Under the partnership agreement, Bill and Ted share all partnership profits and losses equally. The partnership borrows $100,000 from a local bank to purch

C. I. 140,000 II. 40,000

Baker is a partner in BDT with a partnership basis of $60,000. BDT made a liquidating distribution of land with an adjusted basis of $75,000 and a fair market value of $40,000 to Baker. What amount of gain or loss should Baker report?
A) $35,000 loss.
B)

C) $0.

Owen's tax basis in Regal Partnership was $18,000 at the time Owen received a nonliquidating distribution of $3,000 cash and land with an adjusted basis of $7,000 to Regal and a fair market value of $9,000. Regal did not have unrealized receivables, appre

B) $8,000

The adjusted basis of Jody's partnership interest was $50,000 immediately before Jody received a current distribution of $20,000 cash and property with an adjusted basis to the partnership of $40,000 and a fair market value of $35,000.
What amount of taxa

A) $0

The adjusted basis of Smith's interest in EVA partnership was $230,000 immediately before receiving the following distribution in complete liquidation of EVA:
Basis to EVA
Cash $150,000
Real estate 120,000
Fair Market Value
Cash $150,000
Real estate 146,0

D) $80,000

The adjusted basis of Vance's partnership interest in Lex Associates was $180,000 immediately before receiving the following distribution in complete liquidation of Lex:
Basis to Lex
Cash $100,000
Real estate 70,000
Fair Market Value
Cash $100,000
Real es

C) $80,000

Marvel has an adjusted basis in a partnership interest of $25,000 before receiving a current distribution of $4,000 cash, inventory with an adjusted basis of $6,000 and a fair market value of $9,000, and land with a fair market value of $7,000 and an adju

C) $7,000

Mondy had an adjusted basis in her partnership interest of $39,000 before receiving a current distribution. In the current distribution (to which Sec. 751 does not apply), she received the following:
Basis
Cash $ 3,000
Inventory 15,000
Land 1 10,000
Land

D) $3,000 cash; $15,000 inventory; $7,000 land 1; $14,000 land 2.

On December 1, 2019, Krest, a self-employed cash-basis taxpayer, borrowed $200,000 to use in her business. The loan was to be repaid on November 30, 2020. Krest paid the entire interest amount of $24,000 on December 1, 2019. What amount of interest was de

B) $2,000

Mock operates a retail business selling illegal narcotic substances. When Mock calculates business income, he may adjust for
I. Cost of merchandise
II. Business expenses other than the cost of merchandise
A) I only.
B) II only.
C) Both I and II.
D) Neithe

A) I only.

Phil Armonic is actively engaged in the oil business and owns numerous oil leases in the Southwest. During 2019, he made several trips to inspect oil wells on the leases. As a result of these overnight trips, he paid the following:
Plane fares $4,000
Hote

B) $5,400

The following 2019 information pertains to Sam and Ann Hoyt, who filed a joint federal income tax return for the calendar year 2019:
Adjusted gross income -- $34,000
$100 contribution to a recognized political party
The Hoyts itemized their deductions. Wh

A) $0

Bank Corp., a calendar-year corporation, reimburses employees for properly substantiated qualifying business meal expenses. The employees are present at the meals, which are neither lavish nor extravagant, and the reimbursement is not treated as wages sub

B) 50%

On December 1, 2018, Michael, a self-employed cash-basis taxpayer, borrowed $100,000 to use in his business. The loan was to be repaid on November 30, 2019. Michael paid the entire interest of $12,000 on December 1, 2018. What amount of interest was deduc

B) $11,000

Gary Judd is an individual proprietor trading as Lake Stores, an accrual basis enterprise that had been using the allowance method for determining bad debt expense for book purposes. At December 31, 2018, Lake's allowance for doubtful accounts ("bad debt

B) A $4,000 deduction for bad debts and does not have to include any portion of the "reserve" in taxable income.

Bobby is a sole proprietor. During 2019, he incurred the following expenses:
Rental payments for the next 2 years (i.e., 2020 and 2021) $3,000
Country club dues (Bobby frequently entertains clients at the country club) 7,500
Meal expenses incurred while m

D) $750

ABC Corp. leases two buildings. The first lease started January 1, 2019, and was for 3 years at $10,000 per year rent. ABC paid $30,000 in January for the entire 3-year term. The second lease started July 1, 2019, and was for 5 years at $6,000 per year re

C) $13,000

Basic Partnership, a cash-basis, calendar-year entity, began business on February 1, 2019. Basic incurred and paid the following in 2019:
Filing fees incident to the creation of the partnership $ 3,600
Accounting fees to prepare the representations in off

D) $3,600

Nan, a cash basis taxpayer, borrowed money from a bank and signed a 10-year interest-bearing note on business property on January 1 of the current year. The cash flow from Nan's business enabled Nan to prepay the first 3 years of interest attributable to

B) Deduct the current year's interest and amortize the balance over the next 2 years.

Mr. Z, the sole proprietor of Z's Wholesale, transferred an automobile used in his business to Mr. Y, an employee of Z's Wholesale, for business related services rendered during the current year. Z's adjusted basis in the automobile was $6,000 and the fai

D) $88,000

All of the following payments made to employees would be currently deductible as business expenses except
A) Wages paid to employees for constructing a new building to be used in the business.
B) Vacation pay paid to an employee when the employee chooses

A) Wages paid to employees for constructing a new building to be used in the business.

Bob, a calendar-year, cash-basis taxpayer, owns an insurance agency. Bob has four people selling insurance for him. The salesmen incur ordinary and necessary meal expenses for which Bob reimburses them monthly. During the current year, Bob reimbursed his

A) $18,000

Which of the following expenditures incurred in the operation of a business is not required to be capitalized?
A) Cost of replacing an old shingle roof with a new tile roof.
B) Cost of changing from one heating system to another.
C) Cost of replacing an o

D) Cost of replacing small tools.

The Saturn Titans of the Planetary Football League have a team spaceship. The spaceship developed a leak between the power source and living area causing dangerous fumes to enter occasionally. This was fixed at a cost of $100,000. The power source also ne

A) The repair of the leak should be deducted, while the overhaul should be capitalized.

State X imposes a tax based upon the amount of fixed assets a business owns. An individual proprietor would deduct this tax on which schedule?
A) Schedule A.
B) Schedule C.
C) Schedule E.
D) Schedule SE.

B) Schedule C.

George, a sole proprietor, may deduct various taxes imposed by federal, state, local, and foreign governments, if he incurs them in the ordinary course of his business. All of the following are deductible on Schedule C, Form 1040, except
A) Real estate ta

B) State and local income taxes on net income.

A cash-basis taxpayer made a bona fide, nonbusiness loan to an acquaintance in Year 1. At the end of Year 2, it is determined that the taxpayer will likely be able to collect only 20% of the principal, and no interest has been or will be collected. How sh

B) None of the loss is deductible in Year 2.

Michael operates his health food store as a sole proprietorship out of a building he owns. Based on the following information regarding Year 6, compute his net self-employment income (for SE tax purposes) for Year 6.
Gross receipts $100,000
Cost of goods

D) $31,000

The self-employment tax is
A) Fully deductible as an itemized deduction.
B) Fully deductible in determining net income from self-employment.
C) Partially deductible from gross income in arriving at adjusted gross income.
D) Not deductible.

C) Partially deductible from gross income in arriving at adjusted gross income.

Which type of income is not subject to self-employment tax?
A) Wages, salaries, and tips received as an employee.
B) Non-employee compensation.
C) Net profits from sole proprietorship.
D) Distributive share of partnership income.

A) Wages, salaries, and tips received as an employee.

Juan recently started operating a flower shop as a proprietorship. In its first year of operations, the shop had a taxable income of $60,000. Assuming that Juan had no other employment-related earnings,
A) The flower shop must withhold FICA taxes from Jua

B) Juan must pay self-employment tax on the earnings of the business.

During the examination of the financial statements of Viscount Manufacturing Corporation, the CPAs noted that, although Viscount had 860 full-time and part-time employees, it had completely overlooked its responsibilities under the Federal Insurance Contr

C) Since employers and employees owe FICA taxes and since the employer must withhold the employees' tax from their wages as paid, Viscount must remit to the government a tax equal to the amount assessed directly against the employer and the employee.

The federal Social Security Act
A) Does not apply to self-employed persons.
B) Excludes professionals such as accountants, lawyers, and doctors.
C) Provides for a deduction for Social Security taxes paid by the employee that is available against his or he

D) Provides that bonuses and commissions paid as compensation are included as wages in the calculation of employer-employee contributions.

Ernesto was an employee of Med-Tech Corporation for all of 2019. He earned $134,400 in salary. What is the amount of FICA tax paid by Med-Tech Corporation with respect to Ernesto?
A) $8,240
B) $10,167
C) $10,189
D) $10,282

C) $10,189

Which one of the following statements about the self-employment tax is false for 2019?
A) The maximum self-employment tax that can be owed by a self-employed individual is 15.3% times $132,900, or $20,334.
B) Self-employed individuals may deduct one-half

A) The maximum self-employment tax that can be owed by a self-employed individual is 15.3% times $132,900, or $20,334.

Sabrina is a cash-basis self-employed accountant. During 2019, she had the following income and expense items:
Gross receipts $159,700
Operating expenses 31,000
Guaranteed payments from partnership for service to partnership 6,000
Share of income from gen

A) $132,900

Mr. and Mrs. B file a joint income tax return. Mr. B owns and operates a grocery store that had a net income of $15,000 in 2019. Mrs. B is a self-employed physical therapist, and her net income was $42,900. What is the total amount of self-employment tax

C) $8,181

Mr. Y operates his own tax practice. For 2019, his books and records reflect the following:
Fees received $69,500
Operating expenses 24,300
Loss on office equipment destroyed by fire (400)
Gain on sale of computer used in the business 350
Mr. Y also had a

D) $41,742

In 2019, Mr. K had $89,100 in wages subject to Social Security tax and $45,800 in net earnings from self-employment. What is the amount of K's self-employment tax for 2019 (rounded to the nearest dollar)?
A) $6,701
B) $6,759
C) $7,007
D) $20,334

B) $6,759

Strom acquired a 25% interest in Ace Partnership by contributing land having an adjusted basis of $16,000 and a fair market value of $50,000. The land was subject to a $24,000 mortgage, which was assumed by Ace. No other liabilities existed at the time of

$0

The holding period of a partnership interest acquired in exchange for a contributed capital asset begins on the date

The partner's holding period of the capital asset began.

Nolan designed Timber Partnership's new building. Nolan received an interest in the partnership for the services. Nolan's normal billing for these services would be $80,000, and the fair market value of the partnership interest Nolan received is $120,000.

$120,000

The following information pertains to Carr's admission to the Smith & Jones partnership on July 1, 2017:
Carr's contribution of capital: 800 shares of Ed Corporation stock bought in 1999 for $30,000; fair market value of $150,000 on July 1, 2017.
Carr's i

$0

Which of the following should be used in computing the basis of a partner's interest acquired from another partner?
Cash Paid by
Transferee's Share
Transferee
of Partnership
to Transferor
Liabilities

Yes
Yes

Pert contributed land with a fair market value of $20,000 to a new partnership in exchange for a 50% partnership interest. The land had an adjusted basis to Pert of $12,000 and was subject to a $4,000 mortgage, which the partnership assumed. What is the a

$10,000

In the current year, Dave Burr acquired a 20% interest in a partnership by contributing a parcel of land. At the time of Burr's contribution, the land had a fair market value of $35,000, had an adjusted basis to Burr of $8,000, and was subject to a mortga

$0

In the current year, which taxable year may a newly formed partnership not adopt without obtaining prior approval from the IRS?

A January 31 year end if it is a retail enterprise with a natural business year ending January 31 and all of its majority and principal partners are on a calendar year.

Under Sec. 444 of the Internal Revenue Code, certain partnerships can elect to use a tax year different from their required tax year. One of the conditions for eligibility to make a Sec. 444 election is that the partnership must

Choose a tax year in which the deferral period is not longer than 3 months.

On June 1, 2017, Kelly received a 10% interest in Rock Co., a partnership, for services contributed to the partnership. Rock's net assets at that date had a basis of $70,000 and a fair market value of $100,000. In Kelly's 2017 income tax return, what amou

$10,000 ordinary income.

Ben Krug, sole proprietor of Krug Dairy, hired Jan in 2011 for an agreed salary and the promise of a 10% partnership capital interest if Jan continued in Krug's employ until the end of 2016. On January 1, 2017, when the net worth of the business was $300,

$30,000

On January 2, Year 1, Black acquired a 50% interest in New Partnership by contributing property with an adjusted basis of $7,000 and a fair market value of $9,000, subject to a mortgage of $3,000. What was Black's basis in New at January 2, Year 1?

$5,500

The holding period of property acquired by a partnership as a contribution to the contributing partner's capital account

Includes the period during which the property was held by the contributing partner.

Which one of the following statements regarding a partnership's tax year is true?

A partnership may elect to have a tax year other than the generally required tax year if the deferral period for the tax year elected does not exceed 3 months.

During the current year, Norman contributed property held more than 1 year to the MaryAnn Partnership for a 40% interest. The total capital after his contribution was $50,000. His tax basis in the property was $8,000, and it had a fair market value of $10

No gain or loss.

James Elton received a 25% capital interest in Bredbo Associates, a partnership, in return for services rendered, plus a contribution of assets with a basis to Elton of $25,000 and a fair market value of $40,000. The fair market value of Elton's 25% inter

$35,000

At partnership inception, Black acquires a 50% interest in Decorators Partnership by contributing property with an adjusted basis of $250,000. Black recognizes a gain if
The fair market value of the contributed property exceeds its adjusted basis.
The pro

Neither I nor II.

Fact Pattern: Jones and Curry formed Major Partnership as equal partners by contributing the assets below:
Adjusted
Fair Market
Asset
Basis
Value
Jones
Cash
$45,000
$45,000
Curry
Land
30,000
57,000
The land was held by Curry as a capital asset, subject to

$24,000

Fact Pattern: Jones and Curry formed Major Partnership as equal partners by contributing the assets below:
Adjusted
Fair Market
Asset
Basis
Value
Jones
Cash
$45,000
$45,000
Curry
Land
30,000
57,000
The land was held by Curry as a capital asset, subject to

$51,000

Bob acquired a 50% interest in a partnership by contributing depreciable property that had an adjusted basis of $15,000 and a fair market value of $45,000. The property was subject to a liability of $32,000, which the partnership assumed for legitimate bu

$16,000

Martin acquired a 30% interest in LMN Partnership, a cash-basis partnership, by contributing $15,000 cash and the property listed below. In addition, in order to become a partner, Martin had to assume his share of LMN's liabilities. Partnership liabilitie

$73,000

Rose and Irene each have a 50% interest in a partnership that started business on July 1. Rose uses a calendar year, while Irene has a fiscal year ending November 30. Which of the following is true?

The partnership must use the fiscal year ending November 30 because it results in a deferral of 1 month.

Maggie and Simon each have a 50% interest in a partnership that started business October 1. Maggie uses a calendar year, while Simon has a fiscal year ending November 30. Which of the following is true?

The partnership may use the fiscal year ending September 30, provided a Sec. 444 election and payment are made, and the partnership may use the fiscal year ending November 30, as that results in the least deferral.

Mr. Almond farmed a total of 200 acres of land, comprised of two parcels of land located about one-half mile apart. One parcel was 120 acres, and the second parcel was 80 acres. Mr. Almond found moving his workers and equipment between the two parcels to

$50,000

Ola Associates is a limited partnership engaged in real estate development. Hoff, a civil engineer, billed Ola $40,000 in 2016 for consulting services rendered. In full settlement of this invoice, Hoff accepted, in 2017, a $15,000 cash payment plus the fo

$32,000

Bailey contributed land with a fair market value of $75,000 and an adjusted basis of $25,000 to the ABC Partnership in exchange for a 30% interest. The partnership assumed Bailey's $10,000 recourse mortgage on the land. What is Bailey's basis for his part

$18,000

Jeffrey, the sole proprietor of a hardware business, hired Eastwood on January 1, 2014, for an agreed salary and a promise to give him a 25% ownership interest if he were still employed at the end of 3 years, and an additional 25% interest if he continued

$15,000
$15,000

Charles Jordan files his income tax return on a calendar-year basis. He is a 3% partner of a partnership reporting on a June 30 fiscal-year basis. Jordan's share of the partnership's ordinary income was $24,000 for the fiscal year ended June 30, 2016, and

$72,000

Earl acquired a 20% interest in a partnership by contributing property that had an adjusted basis to him of $8,000 and that was subject to a mortgage of $12,000. Which of the following results indicates the amount of capital gain recognized and the basis

$1,600
$0

Barker acquired a 50% interest in Kode Partnership by contributing $20,000 cash and a building with an adjusted basis of $26,000 and a fair market value of $42,000. The building was subject to a $10,000 mortgage, which was assumed by Kode. The other partn

$41,000

Acme and Buck are equal members in Dear, an LLC. Dear has elected not to be treated as an LLC. Dear has not elected to be taxed as a corporation. Acme contributed $7,000 cash, and Buck contributed a machine with an adjusted basis of $5,000 and a fair mark

$8,500

Kerr and Marcus form KM Partnership with a cash contribution of $80,000 from Kerr and a property contribution of land from Marcus. The land has a fair market value of $80,000 and an adjusted basis of $50,000 at the date of the contribution. Kerr and Marcu

$50,000

Smith received a one-third interest of a partnership by contributing $3,000 in cash, stock with a fair market value of $5,000 and a basis of $2,000, and a new computer that cost Smith $2,500. Which of the following amounts represents Smith's basis in the

$7,500

Walker transferred property used in a sole proprietorship to the WXYZ partnership in exchange for a one-fourth interest. The property had an original cost of $75,000, an adjusted tax basis to Walker of $20,000, and fair market value of $50,000. The partne

$20,000

In the absence of an election to adopt an annual accounting period, the required tax year for a partnership is

A tax year of one or more partners with a more-than-50% interest in profits and capital.

Campbell acquired a 10% interest in Vogue Partnership by contributing a building with an adjusted basis of $40,000 and a fair market value of $90,000. The building was subject to a $60,000 mortgage that was assumed by Vogue. The other partners contributed

$0

Able and Baker are equal members in Apple, an LLC. Apple has elected not to be treated as a corporation. Able contributes $7,000 cash and Baker contributes a machine with a basis of $5,000 and a fair market value of $10,000, subject to a liability of $3,0

$5,000

Turner, Reed, and Sumner are equal partners in TRS partnership. Turner contributed land with an adjusted basis of $20,000 and a fair market value (FMV) of $50,000. Reed contributed equipment with an adjusted basis of $40,000 and an FMV of $50,000. Sumner

$50,000

In return for a 20% partnership interest, Skinner contributed $5,000 cash and land with a $12,000 basis and a $20,000 fair market value to the partnership. The land was subject to a $10,000 mortgage that the partnership assumed. In addition, the partnersh

$13,000

Anderson and Decker are equal members in Andek, an LLC, which has not elected to be treated as a corporation. Anderson contributes $7,000 cash, and Decker contributes a machine with an adjusted basis of $5,000 and fair market value of $10,000, subject to

$3,500

Taxpayer A contributed stock with a FMV of $10,000 and a basis of $5,000 to ABC Partnership (which would be treated as an investment company if it had been incorporated) for a 50% interest. What is the partnership's basis in the stock?

$10,000

Which of the following statements is true?

For property that was an unrealized receivable in the hands of the contributing partner, any gain or loss on a disposition by the partnership is ordinary income or loss.

Frank and Nancy form an equal partnership. Frank contributes $15,000 cash, and Nancy contributes depreciable office equipment with a fair market value of $15,000 and an adjusted basis of $8,000. What is the partnership's basis in the equipment for purpose

$8,000

Don and Warren formed an equal partnership to build drag-racing vehicles. Don contributed $5,000 in cash, and Warren contributed a truck with a fair market value of $5,000 and an adjusted tax basis of $4,500. They plan to use the truck for hauling parts a

Record the truck on the books at $4,500 and depreciate it over its remaining recovery period using the straight line method and mid-year convention.

Mr. A, Mr. B, and Mr. C formed a calendar-year partnership. Profits and losses are to be shared equally. Mr. A contributed a building to be used in the business that had an adjusted basis to him of $10,000 and a fair market value of $13,000. The partnersh

$10,000

Mr. Booth has a 20% interest in Partnership X. On April 1 of the current year, Mr. Booth contributed equipment to the partnership for use in the business. At the time of the transfer, the equipment had a fair market value of $60,000 and an adjusted basis

$41,000

On January 1 of the current year, the Pizza Partnership was formed. Tony acquired a 25% share in the partnership by contributing both an oven that had an adjusted basis to him of $10,000 and $5,000 in cash. The oven was subject to a $2,000 liability. Duri

$17,500

The Salt and Pepper Partnership was formed in January of the current year when Salt and Pepper each contributed $10,000 cash and together began to operate a business as equal partners. Both work full-time in the partnership. The partnership borrowed $40,0

$28,100

Partnership LIFE's profits and losses are shared equally among the four partners. The adjusted basis of Partner E's interest in the partnership on December 31, Year 1, was $25,000. On January 2, Year 2, Partner E withdrew $10,000 cash. The partnership rep

$60,000

Two partners each own an equal interest in a general partnership. One partner contributes to the partnership a building that has an adjusted basis of $40,000 and a fair market value of $60,000. The asset is subject to a mortgage of $30,000, which is assum

$15,000

A partner received a partnership interest with a fair market value (FMV) of $55,000 in exchange for the following items:
Basis
FMV
Cash
$20,000
$20,000
Property
10,000
30,000
Services rendered
0
5,000
What is the partner's basis in the partnership interes

$35,000

The individual partner, rather than the partnership, makes which of the following elections?

Whether to take a deduction or credit for taxes paid to foreign countries.

Which of the following statements regarding a Sec. 754 optional basis adjustment election is false?

The new partner elects to adjust the basis of its assets.

On January 2, 2017, Arch and Bean contribute cash equally to form the JK Partnership. Arch and Bean share profits and losses in a ratio of 75% to 25%, respectively. For 2017, the partnership's ordinary income was $40,000. A distribution of $5,000 was made

$30,000

Molloy contributed $40,000 in cash in exchange for a one-third interest in the RST Partnership. In the first year of partnership operations, RST had taxable income of $60,000. In addition, Molloy received a $5,000 distribution of cash and, at the end of t

$61,000

Evan, a 25% partner in Vista Partnership, received a $20,000 guaranteed payment in 2017 for deductible services rendered to the partnership. Guaranteed payments were not made to any other partner. Vista's 2017 partnership income consisted of
Net business

$37,500

Last year, Jim, one of two equal partners, contributed land with a basis to him of $15,000 and a fair market value of $10,000 to the partnership of which he was a member. His capital account was credited for $10,000. The land was later sold for $8,000. As

$6,000 loss.

At the beginning of 2017, Paul owned a 25% interest in Associates Partnership. During the year, a new partner was admitted, and Paul's interest was reduced to 20%. The partnership liabilities at January 1, 2017, were $150,000 but decreased to $100,000 at

Decreased by $17,500.

Lee inherited a partnership interest from Dale. The adjusted basis of Dale's partnership interest was $50,000, and its fair market value on the date of Dale's death (the estate valuation date) was $70,000. What was Lee's original basis for the partnership

$70,000

The method used to depreciate partnership property is an election made by

The partnership and may be any method approved by the IRS.

Dunn and Shaw are partners who share profits and losses equally. In the computation of the partnership's 2017 book income of $100,000, guaranteed payments to partners totaling $60,000 and charitable contributions totaling $1,000 were treated as expenses.

$101,000

Dale's distributive share of income from the calendar-year partnership of Dale & Eck was $50,000 in 2017. On December 15, 2017, Dale, who is a cash-basis taxpayer, received a $27,000 distribution of the partnership's 2017 income, with the $23,000 balance

$50,000

Which of the following limitations will apply in determining a partner's deduction for that partner's share of partnership losses if the partner is an individual?
At-Risk
Passive Loss

Yes
Yes

Gray is a 50% partner in Fabco Partnership. Gray's tax basis in Fabco on January 1, 2017, was $5,000. Fabco made no distributions to the partners during 2017 and recorded the following:
Ordinary income
$20,000
Tax-exempt income
8,000
Portfolio income
4,00

$21,000

Irving Aster, Dennis Brill, and Robert Clark were partners who shared profits and losses equally. On February 28, 2017, Aster sold his interest to Phil Dexter. On March 31, 2017, Brill died, and his estate held his interest for the remainder of the year.

Aster $10,000, Brill $11,250, Estate of Brill $3,750, Clark $15,000, and Dexter $5,000.

Clark and Lewis share profits and losses of 60% and 40%, respectively. The tax basis of each partner's interest in the partnership as of December 31, 2016 was as follows:
Clark
$24,000
Lewis
$18,000
During 2017, the partnership had ordinary income of $50,

$34,000

Dean is a 25% partner in Target Partnership. Dean's tax basis in Target on January 1, Year 1, was $20,000. At the end of Year 1, Dean received a nonliquidating cash distribution of $8,000 from Target. Target's Year 1 accounts recorded the following items:

$25,000

Zachary invested $20,000 for a 30% interest in RST Partnership in the current year. At the same time, Andrea contributed property with a fair market value of $30,000, subject to a $10,000 liability (which the partnership assumed) for a 30% interest. Zacha

$19,000

Jane has a 30% interest in a cash-basis general partnership. Her adjusted basis in the partnership was $50,000 at the beginning of Year 1. There were no distributions to Jane during the year. On August 1, Year 1, the partnership borrowed $200,000 for the

$59,000

Partners Ann, Bob, and Carol of ABC, a calendar-year partnership, share partnership profits and losses in a ratio of 5:3:2, respectively. All three materially participate in the partnership business. Each partner's adjusted basis in the partnership as of

$19,000
$15,000
$9,000

Carol sold 50% of her business to her mother. The resulting partnership had income of $200,000. Capital is a material income-producing factor. Carol performed services worth $90,000, which is reasonable compensation, and her mother performed no services.

$55,000

ABC is a calendar-year partnership with three partners, Alan, Bob, and Cathy. The profits and losses are shared in proportion to each partner's contributions. On January 1, the ratio was 90% for Alan, 5% for Bob, and 5% for Cathy. On December 1, Bob and C

Alan $1,020, Bob $90, Cathy $90.

Arthur is to receive 30% of partnership income, but not less than $5,000. The partnership has net income of $10,000 before any allocation. How much income should Arthur report?
Arthur's
Other
Total
Guaranteed
Distributive
Distributive
Payment
Share
Share

$2,000
$3,000
$5,000

At December 31, 2016, Burns and Cooper were equal partners in a partnership with net assets having a tax basis and fair market value of $100,000. On January 1, 2017, Todd contributed securities with a fair market value of $50,000 (purchased in 2015 at a c

$20,000

Andrew is a 40% partner in the ABC Partnership, in which capital is a material income-producing factor. He gives one-half of his interest to his brother, John. During the current year, Andrew performs services for the partnership for which reasonable comp

$132,500

The at-risk limitation provisions of the Internal Revenue Code may limit
A partner's deduction for his or her distributive share of partnership losses.
A partnership's net operating loss carryover.

I only.

Which of the following entities must pay taxes for federal income tax purposes?

C corporation.

Hot assets" of a partnership would include which of the following?

Unrealized receivables.

George and Martha are equal partners in G&M Partnership. At the beginning of the current tax year, the adjusted basis of George's partnership interest was $32,500, which included his share of $40,000 of partnership liabilities. During the tax year, the fo

$13,500

PDK, LLC, had three members with equal ownership percentages. PDK elected to be treated as a partnership. For the tax year ending December 31, Year 1, PDK had the following income and expense items:
Revenues
$120,000
Interest income
6,000
Gain on sale of

$35,000

When the AQR partnership was formed, partner Acre contributed land with a fair market value of $100,000 and a tax basis of $60,000 in exchange for a one-third interest in the partnership. The AQR partnership agreement specifies that each partner will shar

The first $40,000 of gain is allocated to Acre, and the remaining gain of $60,000 is shared equally by all the partners in the partnership.

Kline and Salomon form the KS Partnership as 50/50 partners. Kline contributes equipment that has a fair market value of $60,000 and an adjusted basis of $45,000. In addition, the equipment is subject to a $10,000 loan that KS Partnership is assuming. Wha

$40,000

Jetson and Tomson are equal partners in JT Partnership, which has the following income and expense items:
Sales
$100,000
Interest income from checking account
1,000
Charitable contributions
3,000
Employee wages
4,000
Cost of goods sold
50,000
What is the

$46,000

In the current year, a partnership reported the following items:
Fees earned
$500,000
Salary expense
100,000
Utility expense
5,000
Charitable contributions
8,000
Long-term capital gain
2,000
Office supplies
500
What is the partnership's ordinary income?

$394,500

An individual is a 50% partner who materially participates in Stone Partnership. The individual's adjusted basis at the beginning of the year was $0. Stone had a $70,000 loss from its business. Stone borrowed $30,000 from a bank of which $20,000 remained

$10,000

Which of the following is true regarding the taxation of a limited partnership?

The limited partnership is a pass-through (nontaxable) entity.

Eng contributed the following assets to a partnership in exchange for a 50% interest in the partnership's capital and profits:
Cash
$50,000
Equipment:
Fair market value
35,000
Adjusted basis
25,000
The partnership has no liabilities. The basis for Eng's i

$75,000

Ralph Elin contributed land to the partnership of Anduz & Elin. Elin's adjusted basis in this land was $50,000, and its fair market value was $75,000. Under the partnership agreement, Elin's capital account was credited with the full fair market value of

$50,000

The following information pertains to land contributed by Pink for a 50% interest in a new partnership:
Adjusted basis to Pink
$100,000
Fair market value
300,000
Mortgage assumed by partnership
30,000
The partnership has no other liabilities. The basis fo

$85,000

Bill and Ted form a partnership with cash contributions of $40,000 each. Bill is a limited partner. Under the partnership agreement, Bill and Ted share all partnership profits and losses equally. The partnership borrows $100,000 from a local bank to purch

$140,000
$40,000

A and B formed a partnership by transferring the following assets to the partnership: A transferred $25,000 in cash and equipment, which cost $27,000, had an adjusted basis of $19,800, and had a fair market value of $30,000; B transferred cash of $50,000.

$19,800

A, B, and C formed a calendar-year partnership. Profits and losses are to be shared equally. A contributed a building to be used in the business that had an adjusted basis to A of $100,000 and a fair market value of $130,000. The partnership also assumed

$100,000

On March 10, Year 1, Daniel contributed land in exchange for a 25% partnership interest in Parr Company. The fair market value of the land at that time was $40,000, and Daniel's adjusted basis was $25,000. On December 2, Year 3, Parr distributed that land

$0

The adjusted basis of Mr. E's partnership interest was $65,000. In a partial liquidation, Mr. E exchanged one-half of his interest for the following properties:
Adjusted Basis
Fair Market Value
Cash
$60,000
$60,000
Inventory
15,000
20,000
Land
15,000
5,00

$5,000
$0

Sunshine Partnership is owned equally by partners Buddy, Jeb, and Bob. Sunshine owns an intangible asset with a basis of $0 and a fair market value of $800, a printing machine with a basis of $300 and a fair market value of $2,000, and a collating machine

$165
$235

Sharon's basis in S & P partnership is $185,000. In a complete liquidation of Sharon's interest in S & P, Sharon received the following:
S & P's Basis
Fair Market Value
Cash
$5,000
$5,000
Building
$50,000
$100,000
Land
$40,000
$50,000
What is Sharon's bas

$120,000

Partner A received inventory items with a basis of $20,000 in complete dissolution of a partnership. Within 5 years, Partner A sells the entire inventory for $30,000. What amount and type of gain should Partner A report?

$10,000 ordinary gain.

On September 30, Year 1, Robert retired from his partnership. At that time, his adjusted basis was $40,000, which included his $15,000 share of the partnership's liabilities. In liquidation of Robert's interest in partnership property, he was relieved of

$0
$12,500

Partnership P has an operating loss of $10,000 for the year. Partner A had a 50% interest in the partnership, with a basis of $5,000 at the beginning of the year. P distributed $2,000 to A during the year. What amount of loss is deductible by A?

$3,000

A limited partnership agreement provides for the following profit allocation formula:
20% of the first $1,000,000 of profit, 25% of the next $1,000,000 of profit, and 30% of profit over $2,000,000 shall be allocated to the general partner.
Each limited pa

$99,000

Three equal partners formed partnership XYZ by each contributing $100,000 to the partnership. In the first year of operations, an $800,000 rental property was purchased in exchange for $200,000 in cash and a $600,000 recourse obligation. The partnership e

$310,000

Sara is a member of a four-person, equal partnership. Sara is unrelated to the other partners. In 2017, Sara sold 100 shares of a listed stock to the partnership for the stock's fair market value of $20,000. Sara's basis for this stock, which was purchase

$6,000

Freeman, a single individual, reported the following income in the current year:
Guaranteed payment from services rendered to a partnership
$50,000
Ordinary income from an S corporation
$20,000
What amount of Freeman's income is subject to self-employment

$50,000

Peterson has a one-third interest in the Spano Partnership. During 2017, Peterson received a $16,000 guaranteed payment, which was deductible by the partnership, for services rendered to Spano. Spano reported a 2017 operating loss of $70,000 before the gu

II only.

Under the Internal Revenue Code sections pertaining to partnerships, guaranteed payments are payments to partners for

Services or the use of capital without regard to partnership income.

Guaranteed payments made by a partnership to partners for services rendered to the partnership that are deductible business expenses under the Internal Revenue Code are
Deductible expenses on the U.S. Partnership Return of Income, Form 1065, in order to a

Both I and II.

For the year ended December 31, 2017, the partnership of Murray and Parker had book income of $100,000, which included the following:
Long-term capital gain
$ 7,000
Section 1231 loss
(3,000)
Dividends
200
Interest paid to partners for use of capital
12,00

$47,900

Nash and Ford are partners who share profits and losses equally. For the year ended December 31, 2017, the partnership had book income of $80,000, which included the following deductions:
Guaranteed salaries to partners:
Nash
$35,000
Ford
25,000
Charitabl

$85,000

Gilroy, a calendar-year taxpayer, is a long-time partner in the firm of Adam and Company, which has a fiscal year ending June 30. The partnership agreement provides for Gilroy to receive 25% of the ordinary business income of the partnership. Gilroy also

$34,000

A guaranteed payment by a partnership to a partner for services rendered may include an agreement to pay
A salary of $5,000 monthly without regard to partnership income
A 25% interest in partnership profits

I only.

Mike received a $10,000 guaranteed payment as a partner in XYZ Partnership on June 30, 2017. XYZ Partnership is on a fiscal year ending March 31. How much of the payment, if any, should Mike include on his individual income tax return for the tax year end

$0

Doug sold 50% of his business to his son, Ben. The resulting partnership had an operating income of $60,000. Capital is a material income-producing factor. Doug performed services worth $24,000, which is reasonable compensation, and Ben performed no servi

$18,000

In computing the ordinary income of a partnership, a deduction is allowed for

Guaranteed payments to partners.

Doris and Lydia are equal partners in the capital and profits of Agee & Nolan but are otherwise unrelated. The following information pertains to 300 shares of Mast Corporation stock sold by Lydia to Agee & Nolan:
Year of purchase
2009
Year of sale
2017
Ba

$5,000

White has a one-third interest in the profits and losses of Rapid Partnership. Rapid's ordinary income for the 2017 calendar year is $30,000, after a $3,000 deduction for a guaranteed payment made to White for services rendered. None of the $30,000 ordina

$13,000

In 2017, Barb and Bet Partnership sold land having a $45,000 basis to the PTA Partnership for $35,000. Pat has a 55% capital and profits interest in the PTA Partnership, and his sister owns 60% of Barb & Bet Partnership. In 2018, the PTA Partnership sells

2017: $0
2018: $0

Ted owns a 60% interest in Alpha Partnership and a 55% interest in Beta Partnership. In August 2017, Alpha sold land to Beta for $85,000. The land had a basis to Alpha of $100,000. In September 2017, Beta sold the land to an unrelated individual for $125,

$25,000 gain

Flagg and Miles are each 50% partners in Decor Partnership. Each partner had a $200,000 tax basis in the partnership on January 1, 2017. Decor's 2017 net business income before guaranteed payments was $45,000. During 2017, Decor made a $7,500 guaranteed p

$18,750

A $100,000 increase in partnership liabilities is treated in which of the following ways?

Increases each partner's basis in proportion to their ownership.

On January 4, 2017, Smith and White contributed $4,000 and $6,000 in cash, respectively, and formed the Macro General Partnership. The partnership agreement allocated profits and losses 40% to Smith and 60% to White. In 2017, Macro purchased property from

Increases Smith's partnership basis by $16,000.

Beck and Nilo are equal partners in B&N Associates, a general partnership. B&N borrowed $10,000 from a bank on an unsecured note, thereby increasing each partner's share of partnership liabilities. As a result of this loan, the basis of each partner's int

Increased.

When a partner's share of partnership liabilities increases, the partner's basis in the partnership

ncreases by the partner's share of the increase.

David and Mark both contributed $100,000 on January 1, 2017, to form DM Limited Partnership. David is a general partner, and Mark is a limited partner. The partnership agreement provided that David would bear any risk of loss and profits would be shared e

Increases David's partnership basis by $300,000.

Ted and Jane form a cash-basis general partnership with cash contributions of $20,000 each. They share all partnership profits and losses equally. They borrow $60,000 and purchase depreciable business equipment. Jane, however, is required to pay the credi

Ted has a basis of $20,000 and Jane has a basis of $80,000 in the partnership.

In return for a 20% partnership interest, Kathy contributed land having a $60,000 fair market value and a $30,000 basis to the partnership. The partnership assumes Kathy's $15,000 liability arising from her purchase of the land. The partnership's liabilit

$18,800

Baker is a partner in BDT with a partnership basis of $60,000. BDT made a liquidating distribution of land with an adjusted basis of $75,000 and a fair market value of $40,000 to Baker. What amount of gain or loss should Baker report?

$0

Owen's tax basis in Regal Partnership was $18,000 at the time Owen received a nonliquidating distribution of $3,000 cash and land with an adjusted basis of $7,000 to Regal and a fair market value of $9,000. Regal did not have unrealized receivables, appre

$8,000

Fact Pattern: The adjusted basis of Jody's partnership interest was $50,000 immediately before Jody received a current distribution of $20,000 cash and property with an adjusted basis to the partnership of $40,000 and a fair market value of $35,000.
What

$0

Fact Pattern: The adjusted basis of Jody's partnership interest was $50,000 immediately before Jody received a current distribution of $20,000 cash and property with an adjusted basis to the partnership of $40,000 and a fair market value of $35,000.
What

$30,000

Fern received $30,000 in cash and an automobile with an adjusted basis and market value of $20,000 in a proportionate liquidating distribution from EF Partnership. Fern's basis in the partnership interest was $60,000 before the distribution. What is Fern'

$30,000

The adjusted basis of Smith's interest in EVA partnership was $230,000 immediately before receiving the following distribution in complete liquidation of EVA:
Fair
Basis to EVA
Market Value
Cash
$150,000
$150,000
Real estate
120,000
146,000
What is Smith'

$80,000

Betty contributed land with a $6,000 basis and a $10,000 FMV to the ABC Partnership in Year 1. In Year 2, the land was distributed to Sally, another partner in the partnership. At the time of the distribution, the land had a $12,000 fair market value, and

$4,000
$10,000

The adjusted basis of Stan's partnership interest is $15,000. He receives a distribution of cash of $6,000 and property with an adjusted basis to the partnership of $11,000. (This was not a distribution in liquidation.) What is the basis of the distribute

$9,000

Hart's adjusted basis in Best Partnership was $9,000 at the time he received the following nonliquidating distributions of partnership property:
Cash
$ 5,000
Land
Adjusted basis
7,000
Fair market value
10,000
What was the amount of Hart's basis in the lan

$4,000

The adjusted basis of Vance's partnership interest in Lex Associates was $180,000 immediately before receiving the following distribution in complete liquidation of Lex:
Fair Market
Basis to Lex
Value
Cash
$100,000
$100,000
Real estate
70,000
96,000
What

$80,000

On June 30, 2017, Berk retired from his partnership. At that time, his basis was $80,000 including his $30,000 share of the partnership's liabilities. Berk's retirement payments consisted of being relieved of his share of the partnership liabilities and r

$0
$40,000

Marvel has an adjusted basis in a partnership interest of $25,000 before receiving a current distribution of $4,000 cash, inventory with an adjusted basis of $6,000 and a fair market value of $9,000, and land with a fair market value of $7,000 and an adju

$7,000

Day's adjusted basis in LMN Partnership interest is $50,000. During the year, Day received a nonliquidating distribution of $25,000 cash plus land with an adjusted basis of $15,000 to LMN, and a fair market value of $20,000. How much is Day's basis in the

$15,000

The basis to a partner of property distributed "in kind" in complete liquidation of the partner's interest is the

Adjusted basis of the partner's interest reduced by any cash distributed to the partner in the same transaction.

Stone's basis in Ace Partnership was $70,000 at the time he received a nonliquidating distribution of partnership capital assets. These capital assets had an adjusted basis of $65,000 to Ace, and a fair market value of $83,000. Ace had no unrealized recei

$0

Curry's adjusted basis in Vantage Partnership was $5,000 at the time he received a nonliquidating distribution of land. The land had an adjusted basis of $6,000 and a fair market value of $9,000 to Vantage. What was the amount of Curry's basis in the land

$5,000

Mondy had an adjusted basis in her partnership interest of $39,000 before receiving a current distribution. In the current distribution (to which Sec. 751 does not apply), she received the following:
Basis
Fair Market Value
Cash
$ 3,000
$ 3,000
Inventory

$3,000 cash; $15,000 inventory; $7,000 land 1; $14,000 land 2.

Mike's interest in Sun Partnership has an adjusted basis of $150,000. In a complete liquidation of his interest, he received the following:
Adjusted
Fair Market
Basis
Value
Cash
$70,000
$70,000
Building
80,000
90,000
Computer
20,000
10,000
Inventory
30,00

$44,445
$5,555

Ryan's adjusted basis in his Lux Partnership interest was $18,000 at the time Ryan received the following nonliquidating distributions of partnership property:
Cash
$10,000
Land
Adjusted basis
14,000
Fair market value
20,000
What is Ryan's tax basis in th

$8,000

On September 1, 2017, Julie's basis in her partnership interest was $75,000. In a distribution in liquidation of her entire interest on that date, she received properties A and B, neither of which were inventory or unrealized receivables. On September 1,

$55,000

Which of the following statements about payments made to a retiring partner or successor in interest of a deceased partner that are not made in exchange for an interest in the partnership property is true?

If the amount of the payment is based on partnership income, the payment is taxable as a distributive share of partnership income.

On January 1, 2017, Ruth had a basis in her partnership interest of $55,000. Thereafter, in liquidation of her entire interest, she received an apartment house and an office building. The apartment house has an adjusted basis to the partnership of $5,000

Apartment house, $44,000; office building, $11,000

Dale was a 50% partner in D&P Partnership. Dale contributed $10,000 in cash upon the formation of the partnership. D&P borrowed $10,000 to purchase equipment. During the first year of operations, D&P had $15,000 net taxable income, $2,000 tax-exempt inter

$18,500

Smith, a partner in Ridge Partnership, had a basis in the partnership interest of $100,000 at the time Smith received a nonliquidating distribution of land with an adjusted basis of $75,000 to Ridge and a fair market value of $135,000. Ridge had no unreal

II only.

The CSU partnership distributed to each partner cash of $4,000, inventory with a basis of $4,000 and a fair market value (FMV) of $6,000, and land with an adjusted basis of $5,000 and a FMV of $3,000 in a liquidating distribution. Partner Chang had an out

$1,000 ordinary gain and $1,000 capital loss.

Anderson's basis in the SBF Partnership is $80,000. Anderson received a nonliquidating distribution of $50,000 cash, and land with an adjusted basis of $40,000 and a fair market value of $50,000. What is Anderson's basis in the land?

$30,000

Olson, Wayne, and Hogan are equal partners in the OWH partnership. Olson's basis in the partnership interest is $70,000. Olson receives a liquidating distribution of $10,000 cash and land with a fair market value of $63,000, and a basis of $58,000. What i

$60,000

On December 31, 2017, after receipt of his share of partnership income, Clark sold his interest in a limited partnership for $30,000 cash and relief of all liabilities. On that date, the adjusted basis of Clark's partnership interest was $40,000, consisti

Capital gain of $15,000.

Reid, Welsh, and May are equal partners in the RWM partnership. Reid's basis in the partnership interest is $60,000. Reid receives a liquidating distribution of $61,000 cash and land with a fair market value of $14,000 and an adjusted basis of $12,000. Wh

$1,000

Brown, a 50% partner in Brown & White, received a distribution of $12,500 in the current year. The partnership's income for the year was $25,000. What is the character of the payment that Brown received?

Current distribution.

As a general partner in Greenland Associates, an individual's share of partnership income for the current tax year is $25,000 ordinary business income and a $10,000 guaranteed payment. The individual also received $5,000 in cash distributions from the par

$35,000

In the current year, when Hoben's tax basis in Lynz Partnership interest was $10,000, Hoben received a liquidating distribution as follows:
Adjusted
Fair
Tax Basis
Market Value
Marketable securities
$ 5,000
$ 5,000
Land
25,000
27,000
Lynz had no appreciat

$0

While preparing a partnership tax return, the accountant discovered that ABC Partnership distributed property to Anne, a partner, in a nonliquidating transfer. No money was distributed to Anne during the year, the property was in the partnership for over

$0 gain, basis in the partnership is reduced to $0, and basis in the property received is $10,000.

Gulde's tax basis in Chyme Partnership was $26,000 at the time Gulde received a liquidating distribution of $12,000 cash and land with an adjusted basis to Chyme of $10,000 and a fair market value of $30,000. Chyme did not have unrealized receivables, app

$14,000

Johnson, an individual, has a 50% interest in DEF Partnership. Johnson's adjusted basis at the beginning of the year was $14,000. The partnership's ordinary income for the current year was $6,000. Johnson received a non-liquidating distribution of $8,000

$9,000

Able, an individual, is a partner in CD Partnership with an adjusted basis of $30,000 for Able's partnership interest. Able received a non-liquidating distribution of $25,000 cash and property with an adjusted basis of $7,000 and a fair market value of $1

$0

Partner A's basis in partnership ABC is $5,000 at the beginning of the year. During the year, Partner A received a nonliquidating distribution of $3,000 cash and property with an adjusted basis of $4,000 and fair market value of $5,000. What was Partner A

$2,000

Fact Pattern: The personal service partnership of Allen, Baker, & Carr had the following cash-basis balance sheet on December 31, Year 1:
Assets
Adjusted
Basis per
Market
Books
Value
Cash
$102,000
$102,000
Unrealized accounts
receivable
--
420,000
Totals

$174,000

Fact Pattern: The personal service partnership of Allen, Baker, & Carr had the following cash-basis balance sheet on December 31, Year 1:
Assets
Adjusted
Basis per
Market
Books
Value
Cash
$102,000
$102,000
Unrealized accounts
receivable
--
420,000
Totals

$140,000

All of the following are considered in determining the basis of a partner's interest in a partnership for purposes of computing gain or loss on the sale or liquidation of that interest except

The partnership book value of the partner's interest.

Carl sold his interest in a partnership for $15,000 in cash when the adjusted basis of his partnership interest was zero. As part of the sales transaction, Carl was relieved of his $10,000 share of partnership liabilities. How much did Carl realize on the

$25,000

Scott became a limited partner in the S&N Partnership with a $10,000 contribution on the formation of the partnership. The adjusted basis of his partnership interest at the end of the current year is $20,000, which includes his $15,000 share of partnershi

$5,000 capital gain.

Tracy has a one-fourth interest in the TANY Partnership. The adjusted basis of his interest at the end of the current year is $30,000. He sells his interest in the TANY Partnership to Roy for $50,000 cash. There was no agreement between Tracy and Roy for

$22,000 ordinary income, $2,000 capital loss

A partnership had four partners. Each partner contributed $100,000 cash. The partnership reported income for the year of $80,000 and distributed $10,000 to each partner. What was each partner's basis in the partnership at the end of the current year?

$110,000

Fact Pattern: Mr. Bonet, a one-third partner, had a $12,000 basis in his partnership interest. Mr. Bonet withdrew from the ABC Partnership on January 1 of the current year when the partnership had the following balance sheet:
Assets
Basis
FMV
Cash
$12,000

$10,000 ordinary income; $1,000 capital gain.

Fact Pattern: Mr. Bonet, a one-third partner, had a $12,000 basis in his partnership interest. Mr. Bonet withdrew from the ABC Partnership on January 1 of the current year when the partnership had the following balance sheet:
Assets
Basis
FMV
Cash
$12,000

$5,000 ordinary income.

For tax purposes, a retiring partner who receives retirement payments ceases to be regarded as a partner

Only after the partner's entire interest in the partnership is liquidated.

Mr. K owned a 50% interest in K&L Partnership. It reports income on the accrual basis. On April 1 of the current year, the partnership was dissolved and it distributed to K one-half of all partnership assets. The partnership had no liabilities. The follow

$2,000 ordinary income.

On December 31, Year 1, Fred's interest in Partnership C had an adjusted basis of $20,000, which included his $25,000 share of partnership liabilities for which neither Fred, the other partners, nor the partnership had assumed any personal liability. C ha

$5,000 capital gain.

K&C, a boat dealership, distributed a cabin cruiser from its inventory (basis $35,000, fair market value $40,000) to Mr. C in complete liquidation of his partnership interest (adjusted basis $50,000). Mr. C used the cabin cruiser personally for 6 years, t

In the year Mr. C sold his cabin cruiser, he recognized a capital gain of $20,000.

Ms. A's interest in Partnership D had an adjusted basis of $40,000. In complete liquidation of D, Ms. A received $20,000 cash, inventory items with a basis to D of $10,000, and land used in the partnership more than 1 year with an adjusted basis to D of $

$10,000

Two individuals are planning to start a business and need advice on selecting the appropriate form of entity. Their long-term business plan contemplates receiving future in-kind property distributions. Which of the following is a pair of business entities

General partnership and a limited liability partnership.

At a time when Nedra's basis in her partnership interest was $5,000, she received a current distribution of $6,000 cash, and land with an adjusted basis of $2,000 and a fair market value of $3,000. The partnership had no unrealized receivables or substant

$1,000 capital gain, $0 basis in land, $0 basis in partnership interest.

On January 3, 2017, the partners' interests in the capital, profits, and losses of Able Partnership were
Percent of Capital,
Profits, and Losses
Dean
25%
Poe
30%
Ritt
45%
On February 4, 2017, Poe sold her entire interest to an unrelated party. Dean sold h

Able terminated as of December 20, 2017.

Partnership ABCD is in the real estate and insurance business. A owns a 40% interest in the capital and profits of the partnership, while B, C, and D each owns a 20% interest. All use a calendar year. At November 1, 2017, the real estate and insurance bus

Partnership A&B is considered to be a continuation of Partnership ABCD.

Cobb, Danver, and Evans each owned a one-third interest in the capital and profits of their calendar-year partnership. On September 18, 2017, Cobb and Danver sold their partnership interests to Frank and immediately withdrew from all participation in the

Terminated on September 18, 2017.

Curry's sale of her partnership interest causes a partnership termination. The partnership's business and financial operations are continued by the other members. What, if any, are the effects of the termination?
There is a deemed distribution of assets t

Both I and II.

Belson and Forman decided to terminate North partnership. On the date of termination, North's balance sheet was as follows:
Adjusted Basis
Cash
$2,000
Equipment (fair market value $4,000)
6,000
Capital � Belson
4,000
Capital � Forman
4,000
Forman's outsid

$1,000

Which of the following statements with respect to a partner's sale or exchange of a partnership interest is false?

Gain attributable to unrealized receivables or inventory is Sec. 1231 income.

Candy is a partner in LX Partnership. The adjusted basis of her partnership interest is $24,000, of which $19,000 represents her share of the partnership liabilities for which neither Candy, the other partners, nor the partnership has assumed personal lia

$10,000 ordinary gain; $13,000 capital gain.

Susan has a 25% interest in the Boggs Partnership. The adjusted basis of her interest at the end of the current year is $40,000. She sells her interest in Boggs Partnership to Brian for $53,000 cash. The basis and fair market value of the partnership's as

$18,000 ordinary income; $5,000 capital loss.

Which of the following statements about the effect of a sale or exchange of a partner's interest in a partnership is true?

The partnership may make an election for an optional adjustment to the basis of partnership assets in the year the interest is transferred.

You are a partner in ABC Partnership. The adjusted basis of your partnership interest at the end of the current year is zero. Your share of potential ordinary income from partnership depreciable property is $5,000. The partnership has no other unrealized

All of the statements are true.

A partnership terminates when
All of its operations are discontinued and no part of any business, financial operations, or venture is continued by any of its partners in a partnership or a limited liability company classified as a partnership.
At least 50

1 and 2 are true in their entirety.

All of the following are characteristics of electing large partnerships except

An electing large partnership will terminate for tax purposes when 50% or more of its interests are sold or exchanged within a 12-month period.

Marwick sold his 30% interest in the PM Partnership to Moses for $90,000 when PM had the following balance sheet:
Assets
Basis
FMV
Cash
$ 50,000
$ 50,000
Inventory
105,000
110,000
Land
70,000
140,000
$225,000
$300,000
Equities
Marwick, capital
$ 67,500
$

$15,000
$33,000
$42,000

T. Palms has a basis of $20,000 for her one-third interest in a partnership. The partnership has no liabilities, cash of $22,000, and property with a partnership basis of $38,000 and fair market value of $44,000. For her one-third interest, Palms receives

$40,000

On December 31 of the current year, the basis of Partner D's interest in BRBQ Partnership was $30,000, which included his $20,000 share of partnership liabilities. There were no unrealized receivables or inventory items. D sold his interest in BRBQ for $2

$10,000

Mr. Gorda, in liquidation of his interest, receives Property #1. Mr. Gorda has a basis of $10,000 for his one-third interest in a partnership. The partnership assets are cash of $4,000, Property #1 with a basis of $11,000 and fair market value of $11,000,

$16,000

On August 1 of the current year, George Hart, Jr., acquired a 25% interest in the Wilson, Hart, and Company partnership by gift from his father. The partnership interest had been acquired by a $50,000 cash investment by Hart, Sr., 20 years ago. The basis

A long-term capital gain of $25,000.

A partnership that is not an electing large partnership is terminated for tax purposes

When at least 50% of the total interest in partnership capital and profits changes hands by sale or exchange within 12 consecutive months.

Mr. Y sold his 30% interest in XYZ Partnership in the current year. The partnership was formed 10 years ago, and it reports income on the cash basis. Mr. Y's adjusted basis in his partnership interest was $32,700, and the partnership had no liabilities at

$4,800
$6,000

On January 2, Year 1, Harvey contributed $12,000 cash to Partnership K, a calendar-year partnership, for a one-fifth interest. On February 1, Year 1, the partnership borrowed $50,000 from a local bank. Neither Harvey, the other partners, nor the partnersh

$11,000

All of the following statements with respect to a partner's sale or exchange of a partnership's interest are true, except

The installment method cannot be used by the partner who sells a partnership interest at a gain.

David Beck and Walter Crocker were equal partners in the calendar-year partnership of Beck & Crocker. On July 1, Year 1, Beck died. Beck's estate became the successor in interest and continued to share in Beck & Crocker's profits until Beck's entire partn

April 30, Year 2.

All of the following items are separately reportable items for electing large partnerships except

Section 1231 gains and losses.

For an electing large partnership, charitable contributions are

Allowed as a deduction at the partnership level, subject to a 10%-of-partnership-taxable-income limitation.

For electing large partnerships, combining capital gains and losses

Occurs at the partnership level, except net capital gain or loss for passive activities and other activities are each separately stated.

For an electing large partnership, miscellaneous itemized deductions are considered at the partnership level by

Combining the items and disallowing 70% of the deductions in determining partnership taxable income.

Partnership Q, an electing large partnership, reported the following items in the current year:
Income from sales
$300,000
Tax-exempt interest
500
Charitable contributions
1,500
Depreciation
2,500
Section 1231 loss on sale of equipment
1,250
Other busines

$144,750

A partnership is able to elect large-partnership status if it has at least how many partners in the preceding tax year?

100

For electing large partnerships, Sec. 1231 gains and losses

Are netted at the partnership level.

For electing large partnerships, the foreign tax credit is

Allowed as a credit to a partner of an electing large partnership, or instead the partner may deduct the foreign taxes.

Atlantic Partnership, an electing large partnership, had the following items for the current year:
Income from sales
$500,000
Dividends on capital stock
2,000
Tax-exempt interest
500
Net rental income
5,000
Net long-term capital gain (28% basket)
4,000
Ne

$250,000 ordinary income; $3,000 long-term capital gain.

Under which of the following circumstances is a partnership that is not an electing large partnership considered terminated for income tax purposes?
Fifty-five percent of the total interest in partnership capital and profits is sold within a 12-month peri

Both I and II.

True

A partnership is an association formed by two or more taxpayers (who may be any type of entity) to carry on a trade or business

true

in a limited liability company, all members are protected from all debts of the partnership unless they personally guaranteed the debt

false

a limited partnership offers all partners protection from claims by the LP's creditors

false

the primary purpose of the partnership agreement is to document the various tax elections made by the partners regarding depreciation methods, treatment of research and experimental costs, calculation of the section 199 deduction and the section 754 elect

true

the taxable income of a partnership flows through to the partners, who report the income on their tax returns

True

an example of the "aggregate concept" underlying partnership taxation is the fact that the partners (rather than the partnership) pay tax on partnership income

False

Each partner's profit-sharing, loss-sharing, and capital-sharing ownership percentages are always the same.

False: Outside basis

The "inside basis" is defined as a partner's basis in the partnership interest

False: Schedule K-1

The partnership reports each partner's share of income to the partner in a single amount on Form 1099

True

Section 721 provides that , in general, no gain or loss is recognized by the partnership or the partner on contribution of appreciated or depreciated property to a partnership in exchange for an interest in the partnership

True

section 721 provides that no gain or loss is recognized on a contribution of property to a partnership in exchange for an interest in the partnership. an exception might apply if the taxpayer receives a cash distribution from the partnership soon after th

False

george received a fully-vested 10% interest in partnership capital and a 20% interest in future partnership profits in exchange for services rendered to the GHP, LLC (not a publicly-traded partnership interest). The future profits of the partnership are s

True

If the partnership properly makes an election for treatment of a specific tax item, the partner is bound by that treatment.

True

syndication costs arise when partnership interests are being marketed to investors. These costs cannot be amortized or deducted.

True

a partnership must provide any information to the partners that the partners would need to calculate deductions not permitted at the partnership level, such as for oil and gas depletion or the corporate dividends received deduction.

False

Items that are NOT required to be shown on the partners' Schedules K-1 include AMT adjustments and preferences and taxes paid to foreign countries, as AMT and the foreign tax credit are calculated by the partnership

False

the JPM partnership is a US-based manufacturing company. JPM calculates the domestic production activities deduction (section 199) and deducts that amount on its Form 1065

True

The amount of a partnership's income and loss from operating activities is combined with separately stated income and expenses to determine the partnership's equivalent of "taxable income" This amount is reconciled to book income on the partnership's Sche

false

Partner's capital accounts should be determined using the same method on form 1065 Schedule L, Form 1065 Schedule M-2, and Schedule K-1 prepared for the partners

False

the sum of the partner's ending basis amounts on all Schedules K-1 equals the partners' ending capital account balance shown on the partnership's Schedule L

false: the overall limitation of section 704(d) must be met

if a partnership allocated losses to the partners, the partners must first apply the passive loss limitations, then the basis limitation, and finally the at-risk limitations. If all three hurdles are met, the partner may deduct the loss.

True

one of the disadvantages of the partnership form is that the partner's share of the partnership's taxable income is taxed on the partner, regardless of whether or not distributed

a limited partner in a limited liability limited partnership

which of the following entity owners CANNOT participate in management of the entity

a partnership is a taxable entity for Federal income tax purposes

which one of the following statements regarding partnership taxation is INCORRECT?

a partner's capital sharing ration is defined as the percent of partnership assets (capital) that would be allocated to the partner upon liquidation of the partnership

which of the following is a correct definition of a concept related to partnership taxation?

the partnership acquires the asset from a partner as a contribution to partnership capital under section 721(a)

a partnership will take a carryover basis in an asset it acquires when:

-The day the contributed property was purchased
-The day the partnership interest was acquired

when property is contributed to a partnership in exchange for a capital and profits interest, when does the partner's holding period begin for the partnership interest?

a 25% interest in the capital of the partnership where there are no restrictions on transferability of the interest

which of the following would be currently taxable as ordinary income to the service partner if received in exchange for services performed for the partnership? (in all cases, assume the interest is not sold within two years after the time it is granted to

calculation of a section 199 deduction amount

which of the following is an election or calculation made by the partner rather than the partnership?

Inventory (in the partner's hands): the partnership reports ordinary income if the property is held as a capital asset and sold within five years of the contribution date.

which of the following statements is ALWAYS correct regarding assets acquired by a newly formed partnership? If partner contributes:

The partnership's net operating loss carryforward

Which one of the following is NOT shown on the partnership's Schedule K on Page 4 of Form 1065?

All partnership income and expense items are reported on Form 1065, page 1

On a partnership's Form 1065, which of the following statements is NOT true?

Income, gains, losses, and deductions must be allocated to the partners in accordance with their capital contributions.

Which of the following statements is NOT a requirement of the substantial economic effect test?

a decrease in partnership debt is treated as a distribution from the partnership to the partner and reduces the partner's basis in the partnership interest

Which of the following statements is correct regarding the manner in which partnership liabilities are reflected in the partner's bases in their partnership interests?

Decreased by the amount of guaranteed payments shown on the partner's Schedule K-1

Which of the following is NOT a specific adjustment to the partners' basis in the partnership interest?

Partners in a general partnership have less personal liability for entity claims than shareholders of a C corporation.

which of the following is NOT a correct statement regarding the advantage of the partnership entity from over a subchapter C corporate form?

John has three employees who are certified as members of a targeted group. Two of the employees worked for John for 2 months in 2015 and came back to work for John on January 1, 2017. The other employee began working for John on January 1, 2017. Each empl

$6,000

With regard to the employment tax responsibilities of farmers, which of the following statements is false?

A farmer-employer must pay federal unemployment tax if (s)he paid cash wages of $20,000 or more to farm workers during the current or preceding calendar year.

During 2017, Archie had the following:
Disabled Access Credit
$ 5,000
Business Energy Credit
400
Net income tax
30,000
Tentative minimum tax
15,000
What is the maximum amount of General Business Credit Archie can claim for 2017?

$5,400

Which of the following vehicles are eligible for suspension of the heavy highway motor vehicle use tax?

Agriculture vehicles used 7,500 or fewer miles.

In 2017, Sherri, who is single, started a leasing business. Her 2017 income tax return reflected the following income and deductions:
Income:
Wages from part-time job
$1,225
Interest income
425
Net short-term capital gain (business)
2,000
Total income
$3,

$2,775

All of the following statements about forgoing the net operating loss (NOL) carryback period are true EXCEPT

A taxpayer has 3 years to amend a prior year's return to include the election.

In regards to the credit for employer-provided childcare facilities and services, which of the following is NOT true?

The dollar amount of the credit is not limited.

Rob and George own an office building that was built 30 years ago. They opened a tax return business in 2016 and made numerous renovations during 2017 to the building to bring it into compliance with the Americans with Disabilities Act of 1990. They had g

$5,000

In computing an individual's net operating loss, all of the following are considered business income or deductions EXCEPT

Contributions made by a self-employed person to a personal retirement plan.

Based on the following information, compute the 2017 net operating loss (NOL) that an individual can carry over to 2018 if the proper election to forgo the carryback is taken.
2016 NOL
$(10,000)
Wages
30,000
S corporation loss
(50,000)
Schedule C net prof

$15,000

Which of the following statements on Business Energy Credit property is false?

The property may be used property.

Spencer leases a fishing yacht to other persons for the entire year and is not engaged in this activity for profit. For the current year, his income and expenses relating to the yacht were as follows:
Income
$2,500
Mortgage interest
1,200
Personal propert

$2,000
$500
$0

What is the amount of the net operating loss for 2017 based on the following information?
Total income:
Interest on nonbusiness savings
$ 425
Net long-term capital gain on sale of business property
2,000
Salary
1,000
Total deductions:
Net loss from busine

$3,000

Which one of the following is deductible in computing a net operating loss for an individual taxpayer?

Loss on disposition of rental property.

Jones Corporation hired a new employee on March 12, Year 1. The new employee was a long-term family assistance recipient and received qualified first-year wages in the amount of $12,000 during Year 1. An additional $3,500 of wages was earned between Janua

$4,000

Fred bought new office equipment 4 years ago for $1,000. In April, a fire destroyed the equipment. Fred estimates that it will cost $1,200 to replace the equipment. Fred estimates the fair market value of the equipment was $500. He had no insurance, and a

$437

In 2017, Rhonda, who is single, started a leasing business. Her 2017 income tax return reflected the following income and deductions:
Income:
Wages from part-time job
$5,000
Interest income
500
Net short-term capital gain (business)
1,000
Dividends receiv

$8,000

The disallowance of not-for-profit activity losses applies to all of the following EXCEPT

C corporations.

Fred, an individual, is engaged in a not-for-profit activity. The income and expenses of the activity are as follows:
Gross income
$ 4,500
Less expenses allocated to activity
Real estate taxes
$1,800
Home mortgage interest
1,200
Utilities
300
Maintenance

$1,000 as a miscellaneous itemized deduction on Schedule A (Form 1040), subject to the 2%-of-adjusted-gross-income limit.

Based on the following information, compute the 2017 net operating loss (NOL) that an individual can carry over to 2018 if the proper election to forgo the carryback is taken.
2016 NOL
$(15,000)
Wages
25,000
S corporation loss
(40,000)
Schedule C net prof

$8,000

Ancient Corporation built an office building in 1935 at a cost of $100,000, which it used as its corporate headquarters. The building had a basis of $14,000 in the current year when Ancient began rehabilitating the structure. Rehabilitation expenditures o

$36,250

Mark and Nancy are married and file a joint return for 2017. They have an NOL (net operating loss) of $5,000. They elect to carry the NOL back to 2015, a year in which Mark and Nancy filed separate returns. Figured separately, Nancy's 2017 deductions were

Mark does not have any NOL to carry back, and Nancy may carry back $5,000.

Which of the following statements about the credit for qualified long-term family assistance recipients within the Work Opportunity Credit is false?

The credit is equal to 50% of qualified first-year wages.

During the current year, Mr. Acre's building was damaged by fire. The building was on land Mr. Acre owned. One-half of the building was used personally by Mr. Acre, and the other half was used in his business. For the current year, Mr. Acre's books and re

$25,000
$92,900

Paula owns and operates a small flower shop that generated a $5,000 loss in 2017. She sold some of the land she uses for the business at a $2,000 gain and some stock she had inherited at a $1,000 loss. She also earned $1,225 from her part-time job as an u

$1,775

Which of the following energy properties qualifies for the Business Energy Credit in 2017?

Geothermal property.

Jason sustained a net operating loss for the current year. If Jason does not elect to forgo the carryback period, to what years may he carry the NOL?

Back 2 years; forward 20 years.

Debbie's car, which she used 50% for business, was stolen in Year 3. It cost $20,000 in Year 1. She had properly claimed depreciation of $4,000. The insurance company reimbursed her $10,000, which was the fair market value at the time of the theft. What i

$1,000

What is Sam's (a single taxpayer's) net operating loss for the current year based on the following information?
Wages from a part-time job
$10,000
Interest on savings
500
Net long-term capital gain on sale of
business asset
5,000
Net loss from business (g

$5,000

For a tax period beginning July 1, a truck with taxable gross weight of 60,000 lbs., registered to Mason Corp., was first used on a public highway on July 10. On December 10, the truck was sold to Mr. Diaz, who registered and used it in the tax period. Th

Mr. Diaz is the only one of the two owners during the tax period with any liability for the tax due from December through June.

Howie, who itemizes his deductions, owns a yacht that he treats as his second home for the home mortgage interest deduction. He is not subject to the limit on home mortgage interest. He leases the yacht to other persons for the entire year. It has been de

$1,800
$600
$200

Baron Landers owned a three-story building, which he built on leased land in Castroville, California. Baron used two floors (2/3 of the building) in his business, and he lived on the third floor (1/3 of the building). The building cost $140,000, and he ma

$2,667

A machine that Ms. Cunningham used in her business was partially destroyed by a fire. The machine had an adjusted basis of $25,000 and a fair market value of $50,000 just before the fire. The fair market value was $20,000 after the fire and before any rep

$10,000 gain.

Mr. Cryzer, a calendar-year taxpayer who itemizes his deductions, raises cows in his spare time and on weekends. In the current year, he sold 25 cows for a total of $7,000 and incurred the following expenses directly related to raising those cows:
Medicin

$0

In computing an individual's net operating loss, which of the following is NOT considered business income or deduction(s)?

Gain on sale of investment property.

Which of the following is NOT a modification required to calculate an individual's net operating loss?

Add back all itemized deductions, except for casualty and theft losses, state income tax on trade and business income, and any employee business expenses.

Which of the following are wages for the purpose of the credit for qualified long-term family assistance recipients within the Work Opportunity Credit?
Remuneration for employment
Educational assistance program expenses
Dependent care expenses

I, II, and III.

For 2017, Able Corporation had $700,000 of gross income from business operations and $750,000 of allowable business expenses. It also received $100,000 in dividends from a domestic corporation for which it can take an 80% deduction. Based on this informat

$(30,000)

Mr. McGowan, who itemizes his deductions, owns a yacht that he treats as his second home for the home mortgage interest deduction. He is not subject to the limit on home mortgage interest. He leases the yacht to other persons for the entire year. It has b

$2,400
$800
$300

Martha owns a grocery store. On October 2, 2017, a tornado caused her store's freezers to lose power. As a result of the power outage, $5,000 of frozen food spoiled. Her insurance company reimbursed her $4,000 on December 7, 2017. In 2017, Martha had a be

Report the inventory as she normally would and report the $4,000 as additional gross income for 2017.

A partner's basis in a cash-basis partnership interest includes the partner's share of a partnership liability if, and to the extent that, the liability

Creates the partnership's basis in an asset.

Which of the following is a true statement with respect to a partnership electing under Sec. 444 a fiscal year that is not normally a required tax year and for which a business purpose does not exist?

The election requires a payment to approximate the tax the partners would have paid if the partnership had switched to its required year.

Members of a family can be partners. Members of a family who must meet special requirements to be recognized as partners include all of the following EXCEPT

Brothers and sisters.

Rimrock Partnership has a fiscal year ending June 30. The partnership's four partners have the following ownership percentages and fiscal years:
Marble
30% Owner
March 31
Stone
25% Owner
December 31
Brick
25% Owner
September 30
Quartz
20% Owner
September

September 30.

Frank and Nancy form an equal partnership. Frank contributes $15,000 cash, and Nancy contributes depreciable office equipment with a fair market value of $15,000 and an adjusted basis of $8,000. What is the partnership's basis in the equipment for purpose

$8,000

Audra acquired a 50% interest in a partnership by contributing property that had an adjusted basis of $20,000 and a fair market value of $50,000. The property was subject to a liability of $44,000, which the partnership assumed for legitimate business pur

Audra must include a gain on her individual return, and her basis in her partnership interest is zero.

Which one of the following is least important when reviewing the partnership agreement for income tax purposes?

The form of the agreement.

Martin acquired a 30% interest in LMN Partnership, a cash-basis partnership, by contributing $15,000 cash and the property listed below. In addition, in order to become a partner, Martin had to assume his share of LMN's liabilities. Partnership liabilitie

$73,000

Which of the following statements with respect to property contributed to a partnership is false?

Exchanges of partnership interests generally qualify for nontaxable treatment as exchanges of like-kind property.

Which of the following statements with respect to contributions to a partnership is false?

The FMV of services contributed to the partnership for a partnership interest is not income to the partner.

Which of the following organizations formed after 1996 cannot be classified as a partnership?

A real estate investment trust.
An insurance company.
A tax-exempt organization.

Which one of the following statements regarding a partnership's tax year is true?

A partnership may elect to have a tax year other than the generally required tax year if the deferral period for the tax year elected does not exceed 3 months.

Which of the following statements is true?

For property that was an unrealized receivable in the hands of the contributing partner, any gain or loss on a disposition by the partnership is ordinary income or loss.

Dave Burr acquired a 20% interest in a partnership by contributing a parcel of land. At the time of Burr's contribution, the land had a fair market value of $35,000, had an adjusted basis to Burr of $8,000, and was subject to a mortgage of $12,000. Paymen

$0

The partnership, not the partners, makes choices about all of the following EXCEPT

Income from discharge of indebtedness.
Most elections affecting the computation of taxable income derived from a partnership must be made by the partnership. However, the election to reduce the basis of depreciable property for amounts excluded from gross

The XYZ Partnership is comprised of three partners. Sam and Earl each own 30% of the capital and profits, and Tim owns 40% of capital and profits. Sam and Earl each use a tax year ending on June 30. Tim's tax year ends September 30. What is the partnershi

June 30.
Unless an exception applies, the partnership must use a required tax year. The required tax year is the first of three rules that applies. The first rule is the majority interest tax year. It states that the tax year is the tax year of partners o

Partnership CDS was formed on October 5 and elected to use a fiscal year ending December 30. CDS is required to file its partnership return, Form 1065, by which of the following dates?

March 15.
Generally, Form 1065 must be filed by the 15th day of the third month following the close of the partnership's tax year. For a tax year ending December 30, the return must be filed by March 15 of the following year.

Partnership A purchased a tract of land for investment for $50,000. It immediately sold the land to Partnership B for $70,000. The fair market value of the land at the time of sale was $75,000. Betty owns 50% of Partnership A. Betty owns 30% and her mothe

Partnership A should report a short-term capital gain of $20,000.
The partnership has a short-term capital gain of $20,000 ($70,000 - $50,000). The asset is a capital asset to each partnership; thus, the gain is not ordinary income. The gain is not deferr

For federal income tax purposes, all of the following statements regarding partnerships are true EXCEPT

Co-ownership of property that is maintained and leased or rented is considered a partnership if the co-owners provide no services to the tenants.

Which of the following is one of the conditions a partnership must meet to be eligible to make a Sec. 444 election (election to use a tax year that is different from a required tax year)?

The partnership has not previously had a Sec. 444 election other than to change an election to a shorter deferral period.
A partnership may elect to use a tax year other than the tax year required. Under Sec. 444, the partnership may make the election onl

Sharon provides services to a partnership during the year in exchange for a capital interest of 30% worth $25,000. Sharon's basis in the partnership is

$25,000, which must be reported by her as income in the year of receipt if the interest is vested.

Earl acquired a 20% interest in a partnership by contributing property that had an adjusted basis to him of $8,000 and that was subject to a mortgage of $12,000. Which of the following results is correct?

Capital Gain Recognized
$1,600
Basis of Partnership Interest
$0

Regarding family partnerships, if a husband and wife carry on a business together and share in the profits and losses,

Each spouse should carry his or her share of the partnership income or loss from the Form 1065, Schedule K-1, to his or her joint or separate individual income tax returns.

Tri-State Partnership has a fiscal year ending June 30. The partnership's four partners have the following ownership percentages and fiscal years:
Boulder
40% Owner
March 31
Granite
30% Owner
December 31
Shale
20% Owner
June 30
Slate
10% Owner
June 30
Ass

December 31.

Maggie and Simon each have a 50% interest in a partnership that started business October 1. Maggie uses a calendar year while Simon has a fiscal year ending November 30. Which of the following is true?

The partnership may use the fiscal year ending September 30 provided a Sec. 444 election and payment are made, and the partnership may use the fiscal year ending November 30 as that results in the least deferral.

Bob and Bill form a partnership with cash contributions of $20,000 each. Bill is not a general partner. Under the partnership agreement, Bob and Bill share all partnership profits and losses equally. The partnership borrows $60,000 to purchase depreciable

Bob
$80,000
Bill
$20,000

In which of the following ownership combinations would Fred be treated as owning more than 50% of the partnership?

Fred
40%
Fred's nephew
20%
Fred's son
40%

The due date, without regard to extensions, of a domestic partnership filing U.S. Return of Partnership Income (Form 1065) is the 15th day of which month following the end of the tax year?

Third.

Rose and Irene each have a 50% interest in a partnership that started business on July 1. Rose uses a calendar year, while Irene has a fiscal year ending November 30. Which of the following is true?

The partnership must use the fiscal year ending November 30 because it results in a deferral of 1 month.

ABC Partnership was formed on March 1 of the current year by three individuals. A contributed $20,000 cash for a 25% interest. B contributed property with an adjusted basis of $28,000 and fair market value of $32,000, subject to a $12,000 mortgage. C cont

$0 gain, $25,000 basis.

Bill and Ted form a partnership with cash contributions of $40,000 each. Bill is not a general partner. Under the partnership agreement, Bill and Ted share all partnership profits and losses equally. The partnership borrows $100,000 from a local bank to p

Ted
$140,000
Bill
$40,000

Jeffrey, the sole proprietor of a hardware business, hired Eastwood on January 1, Year 1, for an agreed salary and a promise to give him a 25% ownership interest if he were still employed at the end of 3 years and an additional 25% interest if he continue

Basis for Partnership Interest
$15,000
Addition to Gross Income
$15,000

In determining the ownership rules of partnerships, which one of the following combinations would not total at least 50% ownership of The Desk Company for Joe?

Joe
40%
His cousin's trust
60%

A partnership, S corporation, or personal service corporation can elect to use a tax year other than its required tax year if it

Elects a year that meets the deferral period requirement
Is not a member of a tiered structure as defined by the regulations.
Has not previously had an election in effect to use a tax year other than its required tax year.

On March 10, Year 1, Daniel contributed land in exchange for a 25% partnership interest in Parr Company. The fair market value of the land at that time was $40,000, and Daniel's adjusted basis was $25,000. On December 2, Year 4, Parr distributed that land

$15,000
Under Sec. 704 (c)(1)(B), precontribution gain must be recognized if the contributed property is distributed to another partner within 7 years of the contribution. Accordingly, Daniel must recognize all of the precontribution gain of $15,000 ($40,

Which of the following would not total more than 50% ownership in T, F, & J Partnership for Ted?

Ted
40%
Ted's wife
5%
Ted's cousin
55%

The following information pertains to land contributed by Pink for a 50% interest in a new partnership:
Adjusted basis to Pink
$100,000
Fair market value
300,000
Mortgage assumed by partnership
30,000
The partnership has no other liabilities. The basis fo

$85,000

A and B formed a partnership by transferring the following assets to the partnership. A transferred $25,000 in cash and equipment, which cost $27,000, had an adjusted basis of $19,800, and had a fair market value of $30,000. B transferred cash of $50,000.

$19,800

Ed and Bob form a partnership with contributions of $30,000 each. Bob is not a general partner. Under the partnership agreement, Ed and Bob share all partnership profits and losses equally. The partnership borrows $70,000 to purchase depreciable equipment

Ed
$100,000
Bob
$30,000

On June 1 of the current year, Kelly received a 10% capital interest in Rock Co., a partnership, for services contributed to the partnership. Rock's net assets at that date had a basis of $70,000 and a fair market value of $100,000. In Kelly's current yea

$10,000 ordinary income.

Phil and Dean formed a general partnership with cash contributions of $10,000 each. All partnership profits and losses are shared equally as stated in the partnership agreement. During the current year, they borrowed $30,000 to purchase depreciable equipm

$30,000

Mr. J had an adjusted basis of $10,000 in a partnership at the beginning of the year. Both Mr. J and the partnership are calendar-year taxpayers. During the year, J received $12,000 in guaranteed payments for services he performed. During the same year, M

$4,000
Beginning basis
$10,000
Cash distribution
(4,000)
Decrease in liabilities
(2,000)
Basis on January 1 (next year)
$ 4,000

Western Enterprises, a general partnership, distributed $8,000 cash to Peter during the year. His adjusted basis (including his share of liabilities) in his partnership interest at the beginning of the year was $9,500. Peter's share of the partnership's t

$500

Crumbly Partnership sold a capital asset to Freeman Partnership at a loss of $50,000. Crumbly had held the property for 5 months. Crumbly is owned 30% by Doug, 30% by Fred, and 40% by Dale, Doug's brother. Freeman Partnership is owned 80% by ABC Corporati

$0

Phil and Don are equal partners in the Hilldale Company. Hilldale has a fiscal year ending on January 31. Phil and Don file their individual tax returns on a calendar year basis. For the tax year ending January 31, 2017, Hilldale had taxable income from t

$50,000

Sandy and Buffy formed the S&B Partnership in November of 2017. They began business operations in December 2017. During 2017, they incurred the following costs:
$2,500 to their attorney for negotiating and preparing the partnership agreement.
$250 for fil

$3,750

If any partner's interest in a partnership changes during the year, which of the following cash basis items of the partnership must be prorated on a daily basis to determine each partner's share of partnership income or loss?

Taxes.
Payments for services or for the use of property.
Interest.

Zeke is a partner in Butter and Egg Partnership. Zeke is to receive 40% of the partnership's income, but not less than $20,000. The partnership has a net income of $10,000 after deducting the $20,000 in Year 1. How much can the partnership deduct for Zeke

$8,000

On March 1 of the current year, Jordan, a member of a three-man equal partnership, bought securities from the partnership for $27,000, their market value. The securities had been acquired by the partnership for $15,000 on August 1 of the previous year. By

$4,000

Mike received a $10,000 guaranteed payment as a partner in XYZ Partnership on June 30, 2017. XYZ Partnership is on a fiscal year ending March 31. How much of the payment, if any, should Mike include on his individual income tax return for the tax year end

0

Marvel has an adjusted basis in a partnership interest of $25,000 before receiving a current distribution of $4,000 cash, inventory with an adjusted basis of $6,000 and a fair market value of $9,000, and land with a fair market value of $7,000 and an adju

$7,000
Beginning basis
$25,000
Less: Cash
(4,000)
Inventory
(6,000)
Land
(8,000)
Ending basis
$ 7,000

In 2017, Lakewood, a cash-basis partnership, incurred $8,100 of organizational expenses that were not paid until 2018. The partnership began business on 7/1/17 and elected to amortize organizational expenses over a 180-month period on its 2017 tax return.

$810

Jane Jerrard, who is single, is a 50% partner in AB Partnership. During 2017, AB placed in service Sec. 179 property having an adjusted basis to the partnership of $2,170,000. The partnership's total income for the year before the Sec. 179 deduction was $

$16,750

ABC is a calendar-year partnership with three partners: Alan, Bob, and Cathy. The profits and losses are shared in proportion to each partner's contributions. On January 1, the ratio was 90% for Alan, 5% for Bob, and 5% for Cathy. On December 1, Bob and C

Alan $1,020, Bob $90, Cathy $90.

Under terms of the partnership agreement, Joyce is entitled to a fixed annual payment of $20,000 and her partner $30,000 without regard to the income of the partnership. Joyce's distributive share of the partnership income is 10%. The partnership income i

$26,000
$20,000
guaranteed
+ 6,000
($60,000 income � 10% share)
$26,000

Franklin Poppin owns a 60% interest in Corn Partnership and a 55% interest in Loblolly Partnership. In May of the current year, Corn sold land to Loblolly for $85,000. The land has a basis to Corn of $100,000. In June, Loblolly sold the land to an unrelat

$25,000 gain

In 2017, Greg and Elaine formed Spring Lawn, Ltd., a calendar year partnership, to provide yard maintenance to residential customers. Before they began operations on May 1, 2017, they incurred legal fees of $5,600 and consulting expenses of $3,000 to draf

$5,160

On March 10, Year 1, Daniel contributed land in exchange for a 25% partnership interest in Parr Company. The fair market value of the land at that time was $40,000, and Daniel's adjusted basis was $25,000. On December 2, Year 3, Parr distributed that land

$0

The M and M Partnership made a current distribution to Mac, a partner owning 50% of the partnership, of land with a fair market value of $6,000 (adjusted basis of $4,000) and a building with a fair market value of $100,000 (adjusted basis $40,000). This d

No gain or loss.

Under the terms of a partnership agreement, William's distributive share of the partnership's income and losses is 20%. Which of the following situations reflects an incorrect method of reporting guaranteed payments?

William is entitled to a fixed annual payment of $15,000 without regard to the partnership's income. The partnership has a $20,000 loss after deducting the guaranteed payment. William should include an ordinary loss of $1,000.

Sylvester owns farm machinery that has a fair market value of $157,000 and an adjusted basis of $90,000. The farm machinery is subject to a liability of $47,000. Dorene would like to purchase Sylvester's farm machinery and makes the following offer
Cash -

$67,000

Which of the following transactions qualifies as a like-kind exchange?

An exchange of land improved with an apartment house for land improved with a store building.

Brett transferred an automobile used in his business to Jim, an employee, as payment for services. The value of the services provided by Jim was $7,000. At the time of the transfer, the automobile had a fair market value of $8,000 and an adjusted basis to

Wage expense $8,000; gain on sale $2,000

Hazel purchased a new business asset (five-year property) on November 30, 2XX7, at a cost of $100,000. This was the only asset acquired by Hazel during 2XX7. On January 7, 2XX8, Hazel placed the asset in service. She did not elect to expense any of the as

$16,000.

Sec. 1245 property includes all of the following depreciable properties except

An office building placed in service in 1994.

Jerome owns a building held for investment purposes that has an adjusted basis to him of $150,000 and a fair market value of $430,000. This building is subject to a mortgage of $90,000. Jake would like to purchase Jerome's building and makes the following

$140,000

On January 2 of the current year, Mr. Quick, a sole proprietor, purchased a new van to be used in his business. He traded in a used van with an adjusted basis of $2,500 and paid $7,500 cash. He did not elect a Sec. 179 deduction for the van. Assuming the

$7,500

Kayla exchanged her unimproved land with an adjusted basis of $80,000 and a fair market value of $130,000 for unimproved land with a fair market value of $100,000 and $10,000 in cash. Kayla also paid $5,000 in closing costs. The unimproved land that Kayla

$55,000

Ms. N's business building was destroyed by a hurricane. The building had an adjusted basis to Ms. N of $200,000 and a fair market value immediately before the hurricane of $300,000. Ms. N received a reimbursement of $270,000 from her insurance company and

$2,000 gain.

Fourteen years ago, Mr. H bought a building for use in his business. He demolished the building in the current year at a cost of $5,000 because repairs were abnormally high and he had an opportunity to rent the land at an acceptable fee. Which of the foll

Neither this $5,000 nor the undepreciated basis of the building demolished is deductible for tax

Strom acquired a 25% interest in Ace Partnership by contributing land having an adjusted basis of $16,000 and a fair market value of $50,000. The land was subject to a $24,000 mortgage, which was assumed by Ace. No other liabilities existed at the time of

$0

The holding period of a partnership interest acquired in exchange for a contributed capital asset begins on the date

The partner's holding period of the capital asset began.

Nolan designed Timber Partnership's new building. Nolan received an interest in the partnership for the services. Nolan's normal billing for these services would be $80,000, and the fair market value of the partnership interest Nolan received is $120,000.

$120,000

The following information pertains to Carr's admission to the Smith & Jones partnership on July 1, 2017:
Carr's contribution of capital: 800 shares of Ed Corporation stock bought in 1999 for $30,000; fair market value of $150,000 on July 1, 2017.
Carr's i

$0

Which of the following should be used in computing the basis of a partner's interest acquired from another partner?
Cash Paid by
Transferee's Share
Transferee
of Partnership
to Transferor
Liabilities

Yes
Yes

Pert contributed land with a fair market value of $20,000 to a new partnership in exchange for a 50% partnership interest. The land had an adjusted basis to Pert of $12,000 and was subject to a $4,000 mortgage, which the partnership assumed. What is the a

$10,000

In the current year, Dave Burr acquired a 20% interest in a partnership by contributing a parcel of land. At the time of Burr's contribution, the land had a fair market value of $35,000, had an adjusted basis to Burr of $8,000, and was subject to a mortga

$0

In the current year, which taxable year may a newly formed partnership not adopt without obtaining prior approval from the IRS?

A January 31 year end if it is a retail enterprise with a natural business year ending January 31 and all of its majority and principal partners are on a calendar year.

Under Sec. 444 of the Internal Revenue Code, certain partnerships can elect to use a tax year different from their required tax year. One of the conditions for eligibility to make a Sec. 444 election is that the partnership must

Choose a tax year in which the deferral period is not longer than 3 months.

On June 1, 2017, Kelly received a 10% interest in Rock Co., a partnership, for services contributed to the partnership. Rock's net assets at that date had a basis of $70,000 and a fair market value of $100,000. In Kelly's 2017 income tax return, what amou

$10,000 ordinary income.

Ben Krug, sole proprietor of Krug Dairy, hired Jan in 2011 for an agreed salary and the promise of a 10% partnership capital interest if Jan continued in Krug's employ until the end of 2016. On January 1, 2017, when the net worth of the business was $300,

$30,000

On January 2, Year 1, Black acquired a 50% interest in New Partnership by contributing property with an adjusted basis of $7,000 and a fair market value of $9,000, subject to a mortgage of $3,000. What was Black's basis in New at January 2, Year 1?

$5,500

The holding period of property acquired by a partnership as a contribution to the contributing partner's capital account

Includes the period during which the property was held by the contributing partner.

Which one of the following statements regarding a partnership's tax year is true?

A partnership may elect to have a tax year other than the generally required tax year if the deferral period for the tax year elected does not exceed 3 months.

During the current year, Norman contributed property held more than 1 year to the MaryAnn Partnership for a 40% interest. The total capital after his contribution was $50,000. His tax basis in the property was $8,000, and it had a fair market value of $10

No gain or loss.

James Elton received a 25% capital interest in Bredbo Associates, a partnership, in return for services rendered, plus a contribution of assets with a basis to Elton of $25,000 and a fair market value of $40,000. The fair market value of Elton's 25% inter

$35,000

At partnership inception, Black acquires a 50% interest in Decorators Partnership by contributing property with an adjusted basis of $250,000. Black recognizes a gain if
The fair market value of the contributed property exceeds its adjusted basis.
The pro

Neither I nor II.

Fact Pattern: Jones and Curry formed Major Partnership as equal partners by contributing the assets below:
Adjusted
Fair Market
Asset
Basis
Value
Jones
Cash
$45,000
$45,000
Curry
Land
30,000
57,000
The land was held by Curry as a capital asset, subject to

$24,000

Fact Pattern: Jones and Curry formed Major Partnership as equal partners by contributing the assets below:
Adjusted
Fair Market
Asset
Basis
Value
Jones
Cash
$45,000
$45,000
Curry
Land
30,000
57,000
The land was held by Curry as a capital asset, subject to

$51,000

Bob acquired a 50% interest in a partnership by contributing depreciable property that had an adjusted basis of $15,000 and a fair market value of $45,000. The property was subject to a liability of $32,000, which the partnership assumed for legitimate bu

$16,000

Martin acquired a 30% interest in LMN Partnership, a cash-basis partnership, by contributing $15,000 cash and the property listed below. In addition, in order to become a partner, Martin had to assume his share of LMN's liabilities. Partnership liabilitie

$73,000

Rose and Irene each have a 50% interest in a partnership that started business on July 1. Rose uses a calendar year, while Irene has a fiscal year ending November 30. Which of the following is true?

The partnership must use the fiscal year ending November 30 because it results in a deferral of 1 month.

Maggie and Simon each have a 50% interest in a partnership that started business October 1. Maggie uses a calendar year, while Simon has a fiscal year ending November 30. Which of the following is true?

The partnership may use the fiscal year ending September 30, provided a Sec. 444 election and payment are made, and the partnership may use the fiscal year ending November 30, as that results in the least deferral.

Mr. Almond farmed a total of 200 acres of land, comprised of two parcels of land located about one-half mile apart. One parcel was 120 acres, and the second parcel was 80 acres. Mr. Almond found moving his workers and equipment between the two parcels to

$50,000

Ola Associates is a limited partnership engaged in real estate development. Hoff, a civil engineer, billed Ola $40,000 in 2016 for consulting services rendered. In full settlement of this invoice, Hoff accepted, in 2017, a $15,000 cash payment plus the fo

$32,000

Bailey contributed land with a fair market value of $75,000 and an adjusted basis of $25,000 to the ABC Partnership in exchange for a 30% interest. The partnership assumed Bailey's $10,000 recourse mortgage on the land. What is Bailey's basis for his part

$18,000

Jeffrey, the sole proprietor of a hardware business, hired Eastwood on January 1, 2014, for an agreed salary and a promise to give him a 25% ownership interest if he were still employed at the end of 3 years, and an additional 25% interest if he continued

$15,000
$15,000

Charles Jordan files his income tax return on a calendar-year basis. He is a 3% partner of a partnership reporting on a June 30 fiscal-year basis. Jordan's share of the partnership's ordinary income was $24,000 for the fiscal year ended June 30, 2016, and

$72,000

Earl acquired a 20% interest in a partnership by contributing property that had an adjusted basis to him of $8,000 and that was subject to a mortgage of $12,000. Which of the following results indicates the amount of capital gain recognized and the basis

$1,600
$0

Barker acquired a 50% interest in Kode Partnership by contributing $20,000 cash and a building with an adjusted basis of $26,000 and a fair market value of $42,000. The building was subject to a $10,000 mortgage, which was assumed by Kode. The other partn

$41,000

Acme and Buck are equal members in Dear, an LLC. Dear has elected not to be treated as an LLC. Dear has not elected to be taxed as a corporation. Acme contributed $7,000 cash, and Buck contributed a machine with an adjusted basis of $5,000 and a fair mark

$8,500

Kerr and Marcus form KM Partnership with a cash contribution of $80,000 from Kerr and a property contribution of land from Marcus. The land has a fair market value of $80,000 and an adjusted basis of $50,000 at the date of the contribution. Kerr and Marcu

$50,000

Smith received a one-third interest of a partnership by contributing $3,000 in cash, stock with a fair market value of $5,000 and a basis of $2,000, and a new computer that cost Smith $2,500. Which of the following amounts represents Smith's basis in the

$7,500

Walker transferred property used in a sole proprietorship to the WXYZ partnership in exchange for a one-fourth interest. The property had an original cost of $75,000, an adjusted tax basis to Walker of $20,000, and fair market value of $50,000. The partne

$20,000

In the absence of an election to adopt an annual accounting period, the required tax year for a partnership is

A tax year of one or more partners with a more-than-50% interest in profits and capital.

Campbell acquired a 10% interest in Vogue Partnership by contributing a building with an adjusted basis of $40,000 and a fair market value of $90,000. The building was subject to a $60,000 mortgage that was assumed by Vogue. The other partners contributed

$0

Able and Baker are equal members in Apple, an LLC. Apple has elected not to be treated as a corporation. Able contributes $7,000 cash and Baker contributes a machine with a basis of $5,000 and a fair market value of $10,000, subject to a liability of $3,0

$5,000

Turner, Reed, and Sumner are equal partners in TRS partnership. Turner contributed land with an adjusted basis of $20,000 and a fair market value (FMV) of $50,000. Reed contributed equipment with an adjusted basis of $40,000 and an FMV of $50,000. Sumner

$50,000

In return for a 20% partnership interest, Skinner contributed $5,000 cash and land with a $12,000 basis and a $20,000 fair market value to the partnership. The land was subject to a $10,000 mortgage that the partnership assumed. In addition, the partnersh

$13,000

Anderson and Decker are equal members in Andek, an LLC, which has not elected to be treated as a corporation. Anderson contributes $7,000 cash, and Decker contributes a machine with an adjusted basis of $5,000 and fair market value of $10,000, subject to

$3,500

Taxpayer A contributed stock with a FMV of $10,000 and a basis of $5,000 to ABC Partnership (which would be treated as an investment company if it had been incorporated) for a 50% interest. What is the partnership's basis in the stock?

$10,000

Which of the following statements is true?

For property that was an unrealized receivable in the hands of the contributing partner, any gain or loss on a disposition by the partnership is ordinary income or loss.

Frank and Nancy form an equal partnership. Frank contributes $15,000 cash, and Nancy contributes depreciable office equipment with a fair market value of $15,000 and an adjusted basis of $8,000. What is the partnership's basis in the equipment for purpose

$8,000

Don and Warren formed an equal partnership to build drag-racing vehicles. Don contributed $5,000 in cash, and Warren contributed a truck with a fair market value of $5,000 and an adjusted tax basis of $4,500. They plan to use the truck for hauling parts a

Record the truck on the books at $4,500 and depreciate it over its remaining recovery period using the straight line method and mid-year convention.

Mr. A, Mr. B, and Mr. C formed a calendar-year partnership. Profits and losses are to be shared equally. Mr. A contributed a building to be used in the business that had an adjusted basis to him of $10,000 and a fair market value of $13,000. The partnersh

$10,000

Mr. Booth has a 20% interest in Partnership X. On April 1 of the current year, Mr. Booth contributed equipment to the partnership for use in the business. At the time of the transfer, the equipment had a fair market value of $60,000 and an adjusted basis

$41,000

On January 1 of the current year, the Pizza Partnership was formed. Tony acquired a 25% share in the partnership by contributing both an oven that had an adjusted basis to him of $10,000 and $5,000 in cash. The oven was subject to a $2,000 liability. Duri

$17,500

The Salt and Pepper Partnership was formed in January of the current year when Salt and Pepper each contributed $10,000 cash and together began to operate a business as equal partners. Both work full-time in the partnership. The partnership borrowed $40,0

$28,100

Partnership LIFE's profits and losses are shared equally among the four partners. The adjusted basis of Partner E's interest in the partnership on December 31, Year 1, was $25,000. On January 2, Year 2, Partner E withdrew $10,000 cash. The partnership rep

$60,000

Two partners each own an equal interest in a general partnership. One partner contributes to the partnership a building that has an adjusted basis of $40,000 and a fair market value of $60,000. The asset is subject to a mortgage of $30,000, which is assum

$15,000

A partner received a partnership interest with a fair market value (FMV) of $55,000 in exchange for the following items:
Basis
FMV
Cash
$20,000
$20,000
Property
10,000
30,000
Services rendered
0
5,000
What is the partner's basis in the partnership interes

$35,000

The individual partner, rather than the partnership, makes which of the following elections?

Whether to take a deduction or credit for taxes paid to foreign countries.

Which of the following statements regarding a Sec. 754 optional basis adjustment election is false?

The new partner elects to adjust the basis of its assets.

On January 2, 2017, Arch and Bean contribute cash equally to form the JK Partnership. Arch and Bean share profits and losses in a ratio of 75% to 25%, respectively. For 2017, the partnership's ordinary income was $40,000. A distribution of $5,000 was made

$30,000

Molloy contributed $40,000 in cash in exchange for a one-third interest in the RST Partnership. In the first year of partnership operations, RST had taxable income of $60,000. In addition, Molloy received a $5,000 distribution of cash and, at the end of t

$61,000

Evan, a 25% partner in Vista Partnership, received a $20,000 guaranteed payment in 2017 for deductible services rendered to the partnership. Guaranteed payments were not made to any other partner. Vista's 2017 partnership income consisted of
Net business

$37,500

Last year, Jim, one of two equal partners, contributed land with a basis to him of $15,000 and a fair market value of $10,000 to the partnership of which he was a member. His capital account was credited for $10,000. The land was later sold for $8,000. As

$6,000 loss.

At the beginning of 2017, Paul owned a 25% interest in Associates Partnership. During the year, a new partner was admitted, and Paul's interest was reduced to 20%. The partnership liabilities at January 1, 2017, were $150,000 but decreased to $100,000 at

Decreased by $17,500.

Lee inherited a partnership interest from Dale. The adjusted basis of Dale's partnership interest was $50,000, and its fair market value on the date of Dale's death (the estate valuation date) was $70,000. What was Lee's original basis for the partnership

$70,000

The method used to depreciate partnership property is an election made by

The partnership and may be any method approved by the IRS.

Dunn and Shaw are partners who share profits and losses equally. In the computation of the partnership's 2017 book income of $100,000, guaranteed payments to partners totaling $60,000 and charitable contributions totaling $1,000 were treated as expenses.

$101,000

Dale's distributive share of income from the calendar-year partnership of Dale & Eck was $50,000 in 2017. On December 15, 2017, Dale, who is a cash-basis taxpayer, received a $27,000 distribution of the partnership's 2017 income, with the $23,000 balance

$50,000

Which of the following limitations will apply in determining a partner's deduction for that partner's share of partnership losses if the partner is an individual?
At-Risk
Passive Loss

Yes
Yes

Gray is a 50% partner in Fabco Partnership. Gray's tax basis in Fabco on January 1, 2017, was $5,000. Fabco made no distributions to the partners during 2017 and recorded the following:
Ordinary income
$20,000
Tax-exempt income
8,000
Portfolio income
4,00

$21,000

Irving Aster, Dennis Brill, and Robert Clark were partners who shared profits and losses equally. On February 28, 2017, Aster sold his interest to Phil Dexter. On March 31, 2017, Brill died, and his estate held his interest for the remainder of the year.

Aster $10,000, Brill $11,250, Estate of Brill $3,750, Clark $15,000, and Dexter $5,000.

Clark and Lewis share profits and losses of 60% and 40%, respectively. The tax basis of each partner's interest in the partnership as of December 31, 2016 was as follows:
Clark
$24,000
Lewis
$18,000
During 2017, the partnership had ordinary income of $50,

$34,000

Dean is a 25% partner in Target Partnership. Dean's tax basis in Target on January 1, Year 1, was $20,000. At the end of Year 1, Dean received a nonliquidating cash distribution of $8,000 from Target. Target's Year 1 accounts recorded the following items:

$25,000

Zachary invested $20,000 for a 30% interest in RST Partnership in the current year. At the same time, Andrea contributed property with a fair market value of $30,000, subject to a $10,000 liability (which the partnership assumed) for a 30% interest. Zacha

$19,000

Jane has a 30% interest in a cash-basis general partnership. Her adjusted basis in the partnership was $50,000 at the beginning of Year 1. There were no distributions to Jane during the year. On August 1, Year 1, the partnership borrowed $200,000 for the

$59,000

Partners Ann, Bob, and Carol of ABC, a calendar-year partnership, share partnership profits and losses in a ratio of 5:3:2, respectively. All three materially participate in the partnership business. Each partner's adjusted basis in the partnership as of

$19,000
$15,000
$9,000

Carol sold 50% of her business to her mother. The resulting partnership had income of $200,000. Capital is a material income-producing factor. Carol performed services worth $90,000, which is reasonable compensation, and her mother performed no services.

$55,000

ABC is a calendar-year partnership with three partners, Alan, Bob, and Cathy. The profits and losses are shared in proportion to each partner's contributions. On January 1, the ratio was 90% for Alan, 5% for Bob, and 5% for Cathy. On December 1, Bob and C

Alan $1,020, Bob $90, Cathy $90.

Arthur is to receive 30% of partnership income, but not less than $5,000. The partnership has net income of $10,000 before any allocation. How much income should Arthur report?
Arthur's
Other
Total
Guaranteed
Distributive
Distributive
Payment
Share
Share

$2,000
$3,000
$5,000

At December 31, 2016, Burns and Cooper were equal partners in a partnership with net assets having a tax basis and fair market value of $100,000. On January 1, 2017, Todd contributed securities with a fair market value of $50,000 (purchased in 2015 at a c

$20,000

Andrew is a 40% partner in the ABC Partnership, in which capital is a material income-producing factor. He gives one-half of his interest to his brother, John. During the current year, Andrew performs services for the partnership for which reasonable comp

$132,500

The at-risk limitation provisions of the Internal Revenue Code may limit
A partner's deduction for his or her distributive share of partnership losses.
A partnership's net operating loss carryover.

I only.

Which of the following entities must pay taxes for federal income tax purposes?

C corporation.

Hot assets" of a partnership would include which of the following?

Unrealized receivables.

George and Martha are equal partners in G&M Partnership. At the beginning of the current tax year, the adjusted basis of George's partnership interest was $32,500, which included his share of $40,000 of partnership liabilities. During the tax year, the fo

$13,500

PDK, LLC, had three members with equal ownership percentages. PDK elected to be treated as a partnership. For the tax year ending December 31, Year 1, PDK had the following income and expense items:
Revenues
$120,000
Interest income
6,000
Gain on sale of

$35,000

When the AQR partnership was formed, partner Acre contributed land with a fair market value of $100,000 and a tax basis of $60,000 in exchange for a one-third interest in the partnership. The AQR partnership agreement specifies that each partner will shar

The first $40,000 of gain is allocated to Acre, and the remaining gain of $60,000 is shared equally by all the partners in the partnership.

Kline and Salomon form the KS Partnership as 50/50 partners. Kline contributes equipment that has a fair market value of $60,000 and an adjusted basis of $45,000. In addition, the equipment is subject to a $10,000 loan that KS Partnership is assuming. Wha

$40,000

Jetson and Tomson are equal partners in JT Partnership, which has the following income and expense items:
Sales
$100,000
Interest income from checking account
1,000
Charitable contributions
3,000
Employee wages
4,000
Cost of goods sold
50,000
What is the

$46,000

In the current year, a partnership reported the following items:
Fees earned
$500,000
Salary expense
100,000
Utility expense
5,000
Charitable contributions
8,000
Long-term capital gain
2,000
Office supplies
500
What is the partnership's ordinary income?

$394,500

An individual is a 50% partner who materially participates in Stone Partnership. The individual's adjusted basis at the beginning of the year was $0. Stone had a $70,000 loss from its business. Stone borrowed $30,000 from a bank of which $20,000 remained

$10,000

Which of the following is true regarding the taxation of a limited partnership?

The limited partnership is a pass-through (nontaxable) entity.

Eng contributed the following assets to a partnership in exchange for a 50% interest in the partnership's capital and profits:
Cash
$50,000
Equipment:
Fair market value
35,000
Adjusted basis
25,000
The partnership has no liabilities. The basis for Eng's i

$75,000

Ralph Elin contributed land to the partnership of Anduz & Elin. Elin's adjusted basis in this land was $50,000, and its fair market value was $75,000. Under the partnership agreement, Elin's capital account was credited with the full fair market value of

$50,000

The following information pertains to land contributed by Pink for a 50% interest in a new partnership:
Adjusted basis to Pink
$100,000
Fair market value
300,000
Mortgage assumed by partnership
30,000
The partnership has no other liabilities. The basis fo

$85,000

Bill and Ted form a partnership with cash contributions of $40,000 each. Bill is a limited partner. Under the partnership agreement, Bill and Ted share all partnership profits and losses equally. The partnership borrows $100,000 from a local bank to purch

$140,000
$40,000

A and B formed a partnership by transferring the following assets to the partnership: A transferred $25,000 in cash and equipment, which cost $27,000, had an adjusted basis of $19,800, and had a fair market value of $30,000; B transferred cash of $50,000.

$19,800

A, B, and C formed a calendar-year partnership. Profits and losses are to be shared equally. A contributed a building to be used in the business that had an adjusted basis to A of $100,000 and a fair market value of $130,000. The partnership also assumed

$100,000

On March 10, Year 1, Daniel contributed land in exchange for a 25% partnership interest in Parr Company. The fair market value of the land at that time was $40,000, and Daniel's adjusted basis was $25,000. On December 2, Year 3, Parr distributed that land

$0

The adjusted basis of Mr. E's partnership interest was $65,000. In a partial liquidation, Mr. E exchanged one-half of his interest for the following properties:
Adjusted Basis
Fair Market Value
Cash
$60,000
$60,000
Inventory
15,000
20,000
Land
15,000
5,00

$5,000
$0

Sunshine Partnership is owned equally by partners Buddy, Jeb, and Bob. Sunshine owns an intangible asset with a basis of $0 and a fair market value of $800, a printing machine with a basis of $300 and a fair market value of $2,000, and a collating machine

$165
$235

Sharon's basis in S & P partnership is $185,000. In a complete liquidation of Sharon's interest in S & P, Sharon received the following:
S & P's Basis
Fair Market Value
Cash
$5,000
$5,000
Building
$50,000
$100,000
Land
$40,000
$50,000
What is Sharon's bas

$120,000

Partner A received inventory items with a basis of $20,000 in complete dissolution of a partnership. Within 5 years, Partner A sells the entire inventory for $30,000. What amount and type of gain should Partner A report?

$10,000 ordinary gain.

On September 30, Year 1, Robert retired from his partnership. At that time, his adjusted basis was $40,000, which included his $15,000 share of the partnership's liabilities. In liquidation of Robert's interest in partnership property, he was relieved of

$0
$12,500

Partnership P has an operating loss of $10,000 for the year. Partner A had a 50% interest in the partnership, with a basis of $5,000 at the beginning of the year. P distributed $2,000 to A during the year. What amount of loss is deductible by A?

$3,000

A limited partnership agreement provides for the following profit allocation formula:
20% of the first $1,000,000 of profit, 25% of the next $1,000,000 of profit, and 30% of profit over $2,000,000 shall be allocated to the general partner.
Each limited pa

$99,000

Three equal partners formed partnership XYZ by each contributing $100,000 to the partnership. In the first year of operations, an $800,000 rental property was purchased in exchange for $200,000 in cash and a $600,000 recourse obligation. The partnership e

$310,000

Sara is a member of a four-person, equal partnership. Sara is unrelated to the other partners. In 2017, Sara sold 100 shares of a listed stock to the partnership for the stock's fair market value of $20,000. Sara's basis for this stock, which was purchase

$6,000

Freeman, a single individual, reported the following income in the current year:
Guaranteed payment from services rendered to a partnership
$50,000
Ordinary income from an S corporation
$20,000
What amount of Freeman's income is subject to self-employment

$50,000

Peterson has a one-third interest in the Spano Partnership. During 2017, Peterson received a $16,000 guaranteed payment, which was deductible by the partnership, for services rendered to Spano. Spano reported a 2017 operating loss of $70,000 before the gu

II only.

Under the Internal Revenue Code sections pertaining to partnerships, guaranteed payments are payments to partners for

Services or the use of capital without regard to partnership income.

Guaranteed payments made by a partnership to partners for services rendered to the partnership that are deductible business expenses under the Internal Revenue Code are
Deductible expenses on the U.S. Partnership Return of Income, Form 1065, in order to a

Both I and II.

For the year ended December 31, 2017, the partnership of Murray and Parker had book income of $100,000, which included the following:
Long-term capital gain
$ 7,000
Section 1231 loss
(3,000)
Dividends
200
Interest paid to partners for use of capital
12,00

$47,900

Nash and Ford are partners who share profits and losses equally. For the year ended December 31, 2017, the partnership had book income of $80,000, which included the following deductions:
Guaranteed salaries to partners:
Nash
$35,000
Ford
25,000
Charitabl

$85,000

Gilroy, a calendar-year taxpayer, is a long-time partner in the firm of Adam and Company, which has a fiscal year ending June 30. The partnership agreement provides for Gilroy to receive 25% of the ordinary business income of the partnership. Gilroy also

$34,000

A guaranteed payment by a partnership to a partner for services rendered may include an agreement to pay
A salary of $5,000 monthly without regard to partnership income
A 25% interest in partnership profits

I only.

Mike received a $10,000 guaranteed payment as a partner in XYZ Partnership on June 30, 2017. XYZ Partnership is on a fiscal year ending March 31. How much of the payment, if any, should Mike include on his individual income tax return for the tax year end

$0

Doug sold 50% of his business to his son, Ben. The resulting partnership had an operating income of $60,000. Capital is a material income-producing factor. Doug performed services worth $24,000, which is reasonable compensation, and Ben performed no servi

$18,000

In computing the ordinary income of a partnership, a deduction is allowed for

Guaranteed payments to partners.

Doris and Lydia are equal partners in the capital and profits of Agee & Nolan but are otherwise unrelated. The following information pertains to 300 shares of Mast Corporation stock sold by Lydia to Agee & Nolan:
Year of purchase
2009
Year of sale
2017
Ba

$5,000

White has a one-third interest in the profits and losses of Rapid Partnership. Rapid's ordinary income for the 2017 calendar year is $30,000, after a $3,000 deduction for a guaranteed payment made to White for services rendered. None of the $30,000 ordina

$13,000

In 2017, Barb and Bet Partnership sold land having a $45,000 basis to the PTA Partnership for $35,000. Pat has a 55% capital and profits interest in the PTA Partnership, and his sister owns 60% of Barb & Bet Partnership. In 2018, the PTA Partnership sells

2017: $0
2018: $0

Ted owns a 60% interest in Alpha Partnership and a 55% interest in Beta Partnership. In August 2017, Alpha sold land to Beta for $85,000. The land had a basis to Alpha of $100,000. In September 2017, Beta sold the land to an unrelated individual for $125,

$25,000 gain

Flagg and Miles are each 50% partners in Decor Partnership. Each partner had a $200,000 tax basis in the partnership on January 1, 2017. Decor's 2017 net business income before guaranteed payments was $45,000. During 2017, Decor made a $7,500 guaranteed p

$18,750

A $100,000 increase in partnership liabilities is treated in which of the following ways?

Increases each partner's basis in proportion to their ownership.

On January 4, 2017, Smith and White contributed $4,000 and $6,000 in cash, respectively, and formed the Macro General Partnership. The partnership agreement allocated profits and losses 40% to Smith and 60% to White. In 2017, Macro purchased property from

Increases Smith's partnership basis by $16,000.

Beck and Nilo are equal partners in B&N Associates, a general partnership. B&N borrowed $10,000 from a bank on an unsecured note, thereby increasing each partner's share of partnership liabilities. As a result of this loan, the basis of each partner's int

Increased.

When a partner's share of partnership liabilities increases, the partner's basis in the partnership

ncreases by the partner's share of the increase.

David and Mark both contributed $100,000 on January 1, 2017, to form DM Limited Partnership. David is a general partner, and Mark is a limited partner. The partnership agreement provided that David would bear any risk of loss and profits would be shared e

Increases David's partnership basis by $300,000.

Ted and Jane form a cash-basis general partnership with cash contributions of $20,000 each. They share all partnership profits and losses equally. They borrow $60,000 and purchase depreciable business equipment. Jane, however, is required to pay the credi

Ted has a basis of $20,000 and Jane has a basis of $80,000 in the partnership.

In return for a 20% partnership interest, Kathy contributed land having a $60,000 fair market value and a $30,000 basis to the partnership. The partnership assumes Kathy's $15,000 liability arising from her purchase of the land. The partnership's liabilit

$18,800

Baker is a partner in BDT with a partnership basis of $60,000. BDT made a liquidating distribution of land with an adjusted basis of $75,000 and a fair market value of $40,000 to Baker. What amount of gain or loss should Baker report?

$0

Owen's tax basis in Regal Partnership was $18,000 at the time Owen received a nonliquidating distribution of $3,000 cash and land with an adjusted basis of $7,000 to Regal and a fair market value of $9,000. Regal did not have unrealized receivables, appre

$8,000

Fact Pattern: The adjusted basis of Jody's partnership interest was $50,000 immediately before Jody received a current distribution of $20,000 cash and property with an adjusted basis to the partnership of $40,000 and a fair market value of $35,000.
What

$0

Fact Pattern: The adjusted basis of Jody's partnership interest was $50,000 immediately before Jody received a current distribution of $20,000 cash and property with an adjusted basis to the partnership of $40,000 and a fair market value of $35,000.
What

$30,000

Fern received $30,000 in cash and an automobile with an adjusted basis and market value of $20,000 in a proportionate liquidating distribution from EF Partnership. Fern's basis in the partnership interest was $60,000 before the distribution. What is Fern'

$30,000

The adjusted basis of Smith's interest in EVA partnership was $230,000 immediately before receiving the following distribution in complete liquidation of EVA:
Fair
Basis to EVA
Market Value
Cash
$150,000
$150,000
Real estate
120,000
146,000
What is Smith'

$80,000

Betty contributed land with a $6,000 basis and a $10,000 FMV to the ABC Partnership in Year 1. In Year 2, the land was distributed to Sally, another partner in the partnership. At the time of the distribution, the land had a $12,000 fair market value, and

$4,000
$10,000

The adjusted basis of Stan's partnership interest is $15,000. He receives a distribution of cash of $6,000 and property with an adjusted basis to the partnership of $11,000. (This was not a distribution in liquidation.) What is the basis of the distribute

$9,000

Hart's adjusted basis in Best Partnership was $9,000 at the time he received the following nonliquidating distributions of partnership property:
Cash
$ 5,000
Land
Adjusted basis
7,000
Fair market value
10,000
What was the amount of Hart's basis in the lan

$4,000

The adjusted basis of Vance's partnership interest in Lex Associates was $180,000 immediately before receiving the following distribution in complete liquidation of Lex:
Fair Market
Basis to Lex
Value
Cash
$100,000
$100,000
Real estate
70,000
96,000
What

$80,000

On June 30, 2017, Berk retired from his partnership. At that time, his basis was $80,000 including his $30,000 share of the partnership's liabilities. Berk's retirement payments consisted of being relieved of his share of the partnership liabilities and r

$0
$40,000

Marvel has an adjusted basis in a partnership interest of $25,000 before receiving a current distribution of $4,000 cash, inventory with an adjusted basis of $6,000 and a fair market value of $9,000, and land with a fair market value of $7,000 and an adju

$7,000

Day's adjusted basis in LMN Partnership interest is $50,000. During the year, Day received a nonliquidating distribution of $25,000 cash plus land with an adjusted basis of $15,000 to LMN, and a fair market value of $20,000. How much is Day's basis in the

$15,000

The basis to a partner of property distributed "in kind" in complete liquidation of the partner's interest is the

Adjusted basis of the partner's interest reduced by any cash distributed to the partner in the same transaction.

Stone's basis in Ace Partnership was $70,000 at the time he received a nonliquidating distribution of partnership capital assets. These capital assets had an adjusted basis of $65,000 to Ace, and a fair market value of $83,000. Ace had no unrealized recei

$0

Curry's adjusted basis in Vantage Partnership was $5,000 at the time he received a nonliquidating distribution of land. The land had an adjusted basis of $6,000 and a fair market value of $9,000 to Vantage. What was the amount of Curry's basis in the land

$5,000

Mondy had an adjusted basis in her partnership interest of $39,000 before receiving a current distribution. In the current distribution (to which Sec. 751 does not apply), she received the following:
Basis
Fair Market Value
Cash
$ 3,000
$ 3,000
Inventory

$3,000 cash; $15,000 inventory; $7,000 land 1; $14,000 land 2.

Mike's interest in Sun Partnership has an adjusted basis of $150,000. In a complete liquidation of his interest, he received the following:
Adjusted
Fair Market
Basis
Value
Cash
$70,000
$70,000
Building
80,000
90,000
Computer
20,000
10,000
Inventory
30,00

$44,445
$5,555

Ryan's adjusted basis in his Lux Partnership interest was $18,000 at the time Ryan received the following nonliquidating distributions of partnership property:
Cash
$10,000
Land
Adjusted basis
14,000
Fair market value
20,000
What is Ryan's tax basis in th

$8,000

On September 1, 2017, Julie's basis in her partnership interest was $75,000. In a distribution in liquidation of her entire interest on that date, she received properties A and B, neither of which were inventory or unrealized receivables. On September 1,

$55,000

Which of the following statements about payments made to a retiring partner or successor in interest of a deceased partner that are not made in exchange for an interest in the partnership property is true?

If the amount of the payment is based on partnership income, the payment is taxable as a distributive share of partnership income.

On January 1, 2017, Ruth had a basis in her partnership interest of $55,000. Thereafter, in liquidation of her entire interest, she received an apartment house and an office building. The apartment house has an adjusted basis to the partnership of $5,000

Apartment house, $44,000; office building, $11,000

Dale was a 50% partner in D&P Partnership. Dale contributed $10,000 in cash upon the formation of the partnership. D&P borrowed $10,000 to purchase equipment. During the first year of operations, D&P had $15,000 net taxable income, $2,000 tax-exempt inter

$18,500

Smith, a partner in Ridge Partnership, had a basis in the partnership interest of $100,000 at the time Smith received a nonliquidating distribution of land with an adjusted basis of $75,000 to Ridge and a fair market value of $135,000. Ridge had no unreal

II only.

The CSU partnership distributed to each partner cash of $4,000, inventory with a basis of $4,000 and a fair market value (FMV) of $6,000, and land with an adjusted basis of $5,000 and a FMV of $3,000 in a liquidating distribution. Partner Chang had an out

$1,000 ordinary gain and $1,000 capital loss.

Anderson's basis in the SBF Partnership is $80,000. Anderson received a nonliquidating distribution of $50,000 cash, and land with an adjusted basis of $40,000 and a fair market value of $50,000. What is Anderson's basis in the land?

$30,000

Olson, Wayne, and Hogan are equal partners in the OWH partnership. Olson's basis in the partnership interest is $70,000. Olson receives a liquidating distribution of $10,000 cash and land with a fair market value of $63,000, and a basis of $58,000. What i

$60,000

On December 31, 2017, after receipt of his share of partnership income, Clark sold his interest in a limited partnership for $30,000 cash and relief of all liabilities. On that date, the adjusted basis of Clark's partnership interest was $40,000, consisti

Capital gain of $15,000.

Reid, Welsh, and May are equal partners in the RWM partnership. Reid's basis in the partnership interest is $60,000. Reid receives a liquidating distribution of $61,000 cash and land with a fair market value of $14,000 and an adjusted basis of $12,000. Wh

$1,000

Brown, a 50% partner in Brown & White, received a distribution of $12,500 in the current year. The partnership's income for the year was $25,000. What is the character of the payment that Brown received?

Current distribution.

As a general partner in Greenland Associates, an individual's share of partnership income for the current tax year is $25,000 ordinary business income and a $10,000 guaranteed payment. The individual also received $5,000 in cash distributions from the par

$35,000

In the current year, when Hoben's tax basis in Lynz Partnership interest was $10,000, Hoben received a liquidating distribution as follows:
Adjusted
Fair
Tax Basis
Market Value
Marketable securities
$ 5,000
$ 5,000
Land
25,000
27,000
Lynz had no appreciat

$0

While preparing a partnership tax return, the accountant discovered that ABC Partnership distributed property to Anne, a partner, in a nonliquidating transfer. No money was distributed to Anne during the year, the property was in the partnership for over

$0 gain, basis in the partnership is reduced to $0, and basis in the property received is $10,000.

Gulde's tax basis in Chyme Partnership was $26,000 at the time Gulde received a liquidating distribution of $12,000 cash and land with an adjusted basis to Chyme of $10,000 and a fair market value of $30,000. Chyme did not have unrealized receivables, app

$14,000

Johnson, an individual, has a 50% interest in DEF Partnership. Johnson's adjusted basis at the beginning of the year was $14,000. The partnership's ordinary income for the current year was $6,000. Johnson received a non-liquidating distribution of $8,000

$9,000

Able, an individual, is a partner in CD Partnership with an adjusted basis of $30,000 for Able's partnership interest. Able received a non-liquidating distribution of $25,000 cash and property with an adjusted basis of $7,000 and a fair market value of $1

$0

Partner A's basis in partnership ABC is $5,000 at the beginning of the year. During the year, Partner A received a nonliquidating distribution of $3,000 cash and property with an adjusted basis of $4,000 and fair market value of $5,000. What was Partner A

$2,000

Fact Pattern: The personal service partnership of Allen, Baker, & Carr had the following cash-basis balance sheet on December 31, Year 1:
Assets
Adjusted
Basis per
Market
Books
Value
Cash
$102,000
$102,000
Unrealized accounts
receivable
--
420,000
Totals

$174,000

Fact Pattern: The personal service partnership of Allen, Baker, & Carr had the following cash-basis balance sheet on December 31, Year 1:
Assets
Adjusted
Basis per
Market
Books
Value
Cash
$102,000
$102,000
Unrealized accounts
receivable
--
420,000
Totals

$140,000

All of the following are considered in determining the basis of a partner's interest in a partnership for purposes of computing gain or loss on the sale or liquidation of that interest except

The partnership book value of the partner's interest.

Carl sold his interest in a partnership for $15,000 in cash when the adjusted basis of his partnership interest was zero. As part of the sales transaction, Carl was relieved of his $10,000 share of partnership liabilities. How much did Carl realize on the

$25,000

Scott became a limited partner in the S&N Partnership with a $10,000 contribution on the formation of the partnership. The adjusted basis of his partnership interest at the end of the current year is $20,000, which includes his $15,000 share of partnershi

$5,000 capital gain.

Tracy has a one-fourth interest in the TANY Partnership. The adjusted basis of his interest at the end of the current year is $30,000. He sells his interest in the TANY Partnership to Roy for $50,000 cash. There was no agreement between Tracy and Roy for

$22,000 ordinary income, $2,000 capital loss

A partnership had four partners. Each partner contributed $100,000 cash. The partnership reported income for the year of $80,000 and distributed $10,000 to each partner. What was each partner's basis in the partnership at the end of the current year?

$110,000

Fact Pattern: Mr. Bonet, a one-third partner, had a $12,000 basis in his partnership interest. Mr. Bonet withdrew from the ABC Partnership on January 1 of the current year when the partnership had the following balance sheet:
Assets
Basis
FMV
Cash
$12,000

$10,000 ordinary income; $1,000 capital gain.

Fact Pattern: Mr. Bonet, a one-third partner, had a $12,000 basis in his partnership interest. Mr. Bonet withdrew from the ABC Partnership on January 1 of the current year when the partnership had the following balance sheet:
Assets
Basis
FMV
Cash
$12,000

$5,000 ordinary income.

For tax purposes, a retiring partner who receives retirement payments ceases to be regarded as a partner

Only after the partner's entire interest in the partnership is liquidated.

Mr. K owned a 50% interest in K&L Partnership. It reports income on the accrual basis. On April 1 of the current year, the partnership was dissolved and it distributed to K one-half of all partnership assets. The partnership had no liabilities. The follow

$2,000 ordinary income.

On December 31, Year 1, Fred's interest in Partnership C had an adjusted basis of $20,000, which included his $25,000 share of partnership liabilities for which neither Fred, the other partners, nor the partnership had assumed any personal liability. C ha

$5,000 capital gain.

K&C, a boat dealership, distributed a cabin cruiser from its inventory (basis $35,000, fair market value $40,000) to Mr. C in complete liquidation of his partnership interest (adjusted basis $50,000). Mr. C used the cabin cruiser personally for 6 years, t

In the year Mr. C sold his cabin cruiser, he recognized a capital gain of $20,000.

Ms. A's interest in Partnership D had an adjusted basis of $40,000. In complete liquidation of D, Ms. A received $20,000 cash, inventory items with a basis to D of $10,000, and land used in the partnership more than 1 year with an adjusted basis to D of $

$10,000

Two individuals are planning to start a business and need advice on selecting the appropriate form of entity. Their long-term business plan contemplates receiving future in-kind property distributions. Which of the following is a pair of business entities

General partnership and a limited liability partnership.

At a time when Nedra's basis in her partnership interest was $5,000, she received a current distribution of $6,000 cash, and land with an adjusted basis of $2,000 and a fair market value of $3,000. The partnership had no unrealized receivables or substant

$1,000 capital gain, $0 basis in land, $0 basis in partnership interest.

On January 3, 2017, the partners' interests in the capital, profits, and losses of Able Partnership were
Percent of Capital,
Profits, and Losses
Dean
25%
Poe
30%
Ritt
45%
On February 4, 2017, Poe sold her entire interest to an unrelated party. Dean sold h

Able terminated as of December 20, 2017.

Partnership ABCD is in the real estate and insurance business. A owns a 40% interest in the capital and profits of the partnership, while B, C, and D each owns a 20% interest. All use a calendar year. At November 1, 2017, the real estate and insurance bus

Partnership A&B is considered to be a continuation of Partnership ABCD.

Cobb, Danver, and Evans each owned a one-third interest in the capital and profits of their calendar-year partnership. On September 18, 2017, Cobb and Danver sold their partnership interests to Frank and immediately withdrew from all participation in the

Terminated on September 18, 2017.

Curry's sale of her partnership interest causes a partnership termination. The partnership's business and financial operations are continued by the other members. What, if any, are the effects of the termination?
There is a deemed distribution of assets t

Both I and II.

Belson and Forman decided to terminate North partnership. On the date of termination, North's balance sheet was as follows:
Adjusted Basis
Cash
$2,000
Equipment (fair market value $4,000)
6,000
Capital � Belson
4,000
Capital � Forman
4,000
Forman's outsid

$1,000

Which of the following statements with respect to a partner's sale or exchange of a partnership interest is false?

Gain attributable to unrealized receivables or inventory is Sec. 1231 income.

Candy is a partner in LX Partnership. The adjusted basis of her partnership interest is $24,000, of which $19,000 represents her share of the partnership liabilities for which neither Candy, the other partners, nor the partnership has assumed personal lia

$10,000 ordinary gain; $13,000 capital gain.

Susan has a 25% interest in the Boggs Partnership. The adjusted basis of her interest at the end of the current year is $40,000. She sells her interest in Boggs Partnership to Brian for $53,000 cash. The basis and fair market value of the partnership's as

$18,000 ordinary income; $5,000 capital loss.

Which of the following statements about the effect of a sale or exchange of a partner's interest in a partnership is true?

The partnership may make an election for an optional adjustment to the basis of partnership assets in the year the interest is transferred.

You are a partner in ABC Partnership. The adjusted basis of your partnership interest at the end of the current year is zero. Your share of potential ordinary income from partnership depreciable property is $5,000. The partnership has no other unrealized

All of the statements are true.

A partnership terminates when
All of its operations are discontinued and no part of any business, financial operations, or venture is continued by any of its partners in a partnership or a limited liability company classified as a partnership.
At least 50

1 and 2 are true in their entirety.

All of the following are characteristics of electing large partnerships except

An electing large partnership will terminate for tax purposes when 50% or more of its interests are sold or exchanged within a 12-month period.

Marwick sold his 30% interest in the PM Partnership to Moses for $90,000 when PM had the following balance sheet:
Assets
Basis
FMV
Cash
$ 50,000
$ 50,000
Inventory
105,000
110,000
Land
70,000
140,000
$225,000
$300,000
Equities
Marwick, capital
$ 67,500
$

$15,000
$33,000
$42,000

T. Palms has a basis of $20,000 for her one-third interest in a partnership. The partnership has no liabilities, cash of $22,000, and property with a partnership basis of $38,000 and fair market value of $44,000. For her one-third interest, Palms receives

$40,000

On December 31 of the current year, the basis of Partner D's interest in BRBQ Partnership was $30,000, which included his $20,000 share of partnership liabilities. There were no unrealized receivables or inventory items. D sold his interest in BRBQ for $2

$10,000

Mr. Gorda, in liquidation of his interest, receives Property #1. Mr. Gorda has a basis of $10,000 for his one-third interest in a partnership. The partnership assets are cash of $4,000, Property #1 with a basis of $11,000 and fair market value of $11,000,

$16,000

On August 1 of the current year, George Hart, Jr., acquired a 25% interest in the Wilson, Hart, and Company partnership by gift from his father. The partnership interest had been acquired by a $50,000 cash investment by Hart, Sr., 20 years ago. The basis

A long-term capital gain of $25,000.

A partnership that is not an electing large partnership is terminated for tax purposes

When at least 50% of the total interest in partnership capital and profits changes hands by sale or exchange within 12 consecutive months.

Mr. Y sold his 30% interest in XYZ Partnership in the current year. The partnership was formed 10 years ago, and it reports income on the cash basis. Mr. Y's adjusted basis in his partnership interest was $32,700, and the partnership had no liabilities at

$4,800
$6,000

On January 2, Year 1, Harvey contributed $12,000 cash to Partnership K, a calendar-year partnership, for a one-fifth interest. On February 1, Year 1, the partnership borrowed $50,000 from a local bank. Neither Harvey, the other partners, nor the partnersh

$11,000

All of the following statements with respect to a partner's sale or exchange of a partnership's interest are true, except

The installment method cannot be used by the partner who sells a partnership interest at a gain.

David Beck and Walter Crocker were equal partners in the calendar-year partnership of Beck & Crocker. On July 1, Year 1, Beck died. Beck's estate became the successor in interest and continued to share in Beck & Crocker's profits until Beck's entire partn

April 30, Year 2.

All of the following items are separately reportable items for electing large partnerships except

Section 1231 gains and losses.

For an electing large partnership, charitable contributions are

Allowed as a deduction at the partnership level, subject to a 10%-of-partnership-taxable-income limitation.

For electing large partnerships, combining capital gains and losses

Occurs at the partnership level, except net capital gain or loss for passive activities and other activities are each separately stated.

For an electing large partnership, miscellaneous itemized deductions are considered at the partnership level by

Combining the items and disallowing 70% of the deductions in determining partnership taxable income.

Partnership Q, an electing large partnership, reported the following items in the current year:
Income from sales
$300,000
Tax-exempt interest
500
Charitable contributions
1,500
Depreciation
2,500
Section 1231 loss on sale of equipment
1,250
Other busines

$144,750

A partnership is able to elect large-partnership status if it has at least how many partners in the preceding tax year?

100

For electing large partnerships, Sec. 1231 gains and losses

Are netted at the partnership level.

For electing large partnerships, the foreign tax credit is

Allowed as a credit to a partner of an electing large partnership, or instead the partner may deduct the foreign taxes.

Atlantic Partnership, an electing large partnership, had the following items for the current year:
Income from sales
$500,000
Dividends on capital stock
2,000
Tax-exempt interest
500
Net rental income
5,000
Net long-term capital gain (28% basket)
4,000
Ne

$250,000 ordinary income; $3,000 long-term capital gain.

Under which of the following circumstances is a partnership that is not an electing large partnership considered terminated for income tax purposes?
Fifty-five percent of the total interest in partnership capital and profits is sold within a 12-month peri

Both I and II.

John has three employees who are certified as members of a targeted group. Two of the employees worked for John for 2 months in 2015 and came back to work for John on January 1, 2017. The other employee began working for John on January 1, 2017. Each empl

$6,000

With regard to the employment tax responsibilities of farmers, which of the following statements is false?

A farmer-employer must pay federal unemployment tax if (s)he paid cash wages of $20,000 or more to farm workers during the current or preceding calendar year.

During 2017, Archie had the following:
Disabled Access Credit
$ 5,000
Business Energy Credit
400
Net income tax
30,000
Tentative minimum tax
15,000
What is the maximum amount of General Business Credit Archie can claim for 2017?

$5,400

Which of the following vehicles are eligible for suspension of the heavy highway motor vehicle use tax?

Agriculture vehicles used 7,500 or fewer miles.

In 2017, Sherri, who is single, started a leasing business. Her 2017 income tax return reflected the following income and deductions:
Income:
Wages from part-time job
$1,225
Interest income
425
Net short-term capital gain (business)
2,000
Total income
$3,

$2,775

All of the following statements about forgoing the net operating loss (NOL) carryback period are true EXCEPT

A taxpayer has 3 years to amend a prior year's return to include the election.

In regards to the credit for employer-provided childcare facilities and services, which of the following is NOT true?

The dollar amount of the credit is not limited.

Rob and George own an office building that was built 30 years ago. They opened a tax return business in 2016 and made numerous renovations during 2017 to the building to bring it into compliance with the Americans with Disabilities Act of 1990. They had g

$5,000

In computing an individual's net operating loss, all of the following are considered business income or deductions EXCEPT

Contributions made by a self-employed person to a personal retirement plan.

Based on the following information, compute the 2017 net operating loss (NOL) that an individual can carry over to 2018 if the proper election to forgo the carryback is taken.
2016 NOL
$(10,000)
Wages
30,000
S corporation loss
(50,000)
Schedule C net prof

$15,000

Which of the following statements on Business Energy Credit property is false?

The property may be used property.

Spencer leases a fishing yacht to other persons for the entire year and is not engaged in this activity for profit. For the current year, his income and expenses relating to the yacht were as follows:
Income
$2,500
Mortgage interest
1,200
Personal propert

$2,000
$500
$0

What is the amount of the net operating loss for 2017 based on the following information?
Total income:
Interest on nonbusiness savings
$ 425
Net long-term capital gain on sale of business property
2,000
Salary
1,000
Total deductions:
Net loss from busine

$3,000

Which one of the following is deductible in computing a net operating loss for an individual taxpayer?

Loss on disposition of rental property.

Jones Corporation hired a new employee on March 12, Year 1. The new employee was a long-term family assistance recipient and received qualified first-year wages in the amount of $12,000 during Year 1. An additional $3,500 of wages was earned between Janua

$4,000

Fred bought new office equipment 4 years ago for $1,000. In April, a fire destroyed the equipment. Fred estimates that it will cost $1,200 to replace the equipment. Fred estimates the fair market value of the equipment was $500. He had no insurance, and a

$437

In 2017, Rhonda, who is single, started a leasing business. Her 2017 income tax return reflected the following income and deductions:
Income:
Wages from part-time job
$5,000
Interest income
500
Net short-term capital gain (business)
1,000
Dividends receiv

$8,000

The disallowance of not-for-profit activity losses applies to all of the following EXCEPT

C corporations.

Fred, an individual, is engaged in a not-for-profit activity. The income and expenses of the activity are as follows:
Gross income
$ 4,500
Less expenses allocated to activity
Real estate taxes
$1,800
Home mortgage interest
1,200
Utilities
300
Maintenance

$1,000 as a miscellaneous itemized deduction on Schedule A (Form 1040), subject to the 2%-of-adjusted-gross-income limit.

Based on the following information, compute the 2017 net operating loss (NOL) that an individual can carry over to 2018 if the proper election to forgo the carryback is taken.
2016 NOL
$(15,000)
Wages
25,000
S corporation loss
(40,000)
Schedule C net prof

$8,000

Ancient Corporation built an office building in 1935 at a cost of $100,000, which it used as its corporate headquarters. The building had a basis of $14,000 in the current year when Ancient began rehabilitating the structure. Rehabilitation expenditures o

$36,250

Mark and Nancy are married and file a joint return for 2017. They have an NOL (net operating loss) of $5,000. They elect to carry the NOL back to 2015, a year in which Mark and Nancy filed separate returns. Figured separately, Nancy's 2017 deductions were

Mark does not have any NOL to carry back, and Nancy may carry back $5,000.

Which of the following statements about the credit for qualified long-term family assistance recipients within the Work Opportunity Credit is false?

The credit is equal to 50% of qualified first-year wages.

During the current year, Mr. Acre's building was damaged by fire. The building was on land Mr. Acre owned. One-half of the building was used personally by Mr. Acre, and the other half was used in his business. For the current year, Mr. Acre's books and re

$25,000
$92,900

Paula owns and operates a small flower shop that generated a $5,000 loss in 2017. She sold some of the land she uses for the business at a $2,000 gain and some stock she had inherited at a $1,000 loss. She also earned $1,225 from her part-time job as an u

$1,775

Which of the following energy properties qualifies for the Business Energy Credit in 2017?

Geothermal property.

Jason sustained a net operating loss for the current year. If Jason does not elect to forgo the carryback period, to what years may he carry the NOL?

Back 2 years; forward 20 years.

Debbie's car, which she used 50% for business, was stolen in Year 3. It cost $20,000 in Year 1. She had properly claimed depreciation of $4,000. The insurance company reimbursed her $10,000, which was the fair market value at the time of the theft. What i

$1,000

What is Sam's (a single taxpayer's) net operating loss for the current year based on the following information?
Wages from a part-time job
$10,000
Interest on savings
500
Net long-term capital gain on sale of
business asset
5,000
Net loss from business (g

$5,000

For a tax period beginning July 1, a truck with taxable gross weight of 60,000 lbs., registered to Mason Corp., was first used on a public highway on July 10. On December 10, the truck was sold to Mr. Diaz, who registered and used it in the tax period. Th

Mr. Diaz is the only one of the two owners during the tax period with any liability for the tax due from December through June.

Howie, who itemizes his deductions, owns a yacht that he treats as his second home for the home mortgage interest deduction. He is not subject to the limit on home mortgage interest. He leases the yacht to other persons for the entire year. It has been de

$1,800
$600
$200

Baron Landers owned a three-story building, which he built on leased land in Castroville, California. Baron used two floors (2/3 of the building) in his business, and he lived on the third floor (1/3 of the building). The building cost $140,000, and he ma

$2,667

A machine that Ms. Cunningham used in her business was partially destroyed by a fire. The machine had an adjusted basis of $25,000 and a fair market value of $50,000 just before the fire. The fair market value was $20,000 after the fire and before any rep

$10,000 gain.

Mr. Cryzer, a calendar-year taxpayer who itemizes his deductions, raises cows in his spare time and on weekends. In the current year, he sold 25 cows for a total of $7,000 and incurred the following expenses directly related to raising those cows:
Medicin

$0

In computing an individual's net operating loss, which of the following is NOT considered business income or deduction(s)?

Gain on sale of investment property.

Which of the following is NOT a modification required to calculate an individual's net operating loss?

Add back all itemized deductions, except for casualty and theft losses, state income tax on trade and business income, and any employee business expenses.

Which of the following are wages for the purpose of the credit for qualified long-term family assistance recipients within the Work Opportunity Credit?
Remuneration for employment
Educational assistance program expenses
Dependent care expenses

I, II, and III.

For 2017, Able Corporation had $700,000 of gross income from business operations and $750,000 of allowable business expenses. It also received $100,000 in dividends from a domestic corporation for which it can take an 80% deduction. Based on this informat

$(30,000)

Mr. McGowan, who itemizes his deductions, owns a yacht that he treats as his second home for the home mortgage interest deduction. He is not subject to the limit on home mortgage interest. He leases the yacht to other persons for the entire year. It has b

$2,400
$800
$300

Martha owns a grocery store. On October 2, 2017, a tornado caused her store's freezers to lose power. As a result of the power outage, $5,000 of frozen food spoiled. Her insurance company reimbursed her $4,000 on December 7, 2017. In 2017, Martha had a be

Report the inventory as she normally would and report the $4,000 as additional gross income for 2017.

A partner's basis in a cash-basis partnership interest includes the partner's share of a partnership liability if, and to the extent that, the liability

Creates the partnership's basis in an asset.

Which of the following is a true statement with respect to a partnership electing under Sec. 444 a fiscal year that is not normally a required tax year and for which a business purpose does not exist?

The election requires a payment to approximate the tax the partners would have paid if the partnership had switched to its required year.

Members of a family can be partners. Members of a family who must meet special requirements to be recognized as partners include all of the following EXCEPT

Brothers and sisters.

Rimrock Partnership has a fiscal year ending June 30. The partnership's four partners have the following ownership percentages and fiscal years:
Marble
30% Owner
March 31
Stone
25% Owner
December 31
Brick
25% Owner
September 30
Quartz
20% Owner
September

September 30.

Frank and Nancy form an equal partnership. Frank contributes $15,000 cash, and Nancy contributes depreciable office equipment with a fair market value of $15,000 and an adjusted basis of $8,000. What is the partnership's basis in the equipment for purpose

$8,000

Audra acquired a 50% interest in a partnership by contributing property that had an adjusted basis of $20,000 and a fair market value of $50,000. The property was subject to a liability of $44,000, which the partnership assumed for legitimate business pur

Audra must include a gain on her individual return, and her basis in her partnership interest is zero.

Which one of the following is least important when reviewing the partnership agreement for income tax purposes?

The form of the agreement.

Martin acquired a 30% interest in LMN Partnership, a cash-basis partnership, by contributing $15,000 cash and the property listed below. In addition, in order to become a partner, Martin had to assume his share of LMN's liabilities. Partnership liabilitie

$73,000

Which of the following statements with respect to property contributed to a partnership is false?

Exchanges of partnership interests generally qualify for nontaxable treatment as exchanges of like-kind property.

Which of the following statements with respect to contributions to a partnership is false?

The FMV of services contributed to the partnership for a partnership interest is not income to the partner.

Which of the following organizations formed after 1996 cannot be classified as a partnership?

A real estate investment trust.
An insurance company.
A tax-exempt organization.

Which one of the following statements regarding a partnership's tax year is true?

A partnership may elect to have a tax year other than the generally required tax year if the deferral period for the tax year elected does not exceed 3 months.

Which of the following statements is true?

For property that was an unrealized receivable in the hands of the contributing partner, any gain or loss on a disposition by the partnership is ordinary income or loss.

Dave Burr acquired a 20% interest in a partnership by contributing a parcel of land. At the time of Burr's contribution, the land had a fair market value of $35,000, had an adjusted basis to Burr of $8,000, and was subject to a mortgage of $12,000. Paymen

$0

The partnership, not the partners, makes choices about all of the following EXCEPT

Income from discharge of indebtedness.
Most elections affecting the computation of taxable income derived from a partnership must be made by the partnership. However, the election to reduce the basis of depreciable property for amounts excluded from gross

The XYZ Partnership is comprised of three partners. Sam and Earl each own 30% of the capital and profits, and Tim owns 40% of capital and profits. Sam and Earl each use a tax year ending on June 30. Tim's tax year ends September 30. What is the partnershi

June 30.
Unless an exception applies, the partnership must use a required tax year. The required tax year is the first of three rules that applies. The first rule is the majority interest tax year. It states that the tax year is the tax year of partners o

Partnership CDS was formed on October 5 and elected to use a fiscal year ending December 30. CDS is required to file its partnership return, Form 1065, by which of the following dates?

March 15.
Generally, Form 1065 must be filed by the 15th day of the third month following the close of the partnership's tax year. For a tax year ending December 30, the return must be filed by March 15 of the following year.

Partnership A purchased a tract of land for investment for $50,000. It immediately sold the land to Partnership B for $70,000. The fair market value of the land at the time of sale was $75,000. Betty owns 50% of Partnership A. Betty owns 30% and her mothe

Partnership A should report a short-term capital gain of $20,000.
The partnership has a short-term capital gain of $20,000 ($70,000 - $50,000). The asset is a capital asset to each partnership; thus, the gain is not ordinary income. The gain is not deferr

For federal income tax purposes, all of the following statements regarding partnerships are true EXCEPT

Co-ownership of property that is maintained and leased or rented is considered a partnership if the co-owners provide no services to the tenants.

Which of the following is one of the conditions a partnership must meet to be eligible to make a Sec. 444 election (election to use a tax year that is different from a required tax year)?

The partnership has not previously had a Sec. 444 election other than to change an election to a shorter deferral period.
A partnership may elect to use a tax year other than the tax year required. Under Sec. 444, the partnership may make the election onl

Sharon provides services to a partnership during the year in exchange for a capital interest of 30% worth $25,000. Sharon's basis in the partnership is

$25,000, which must be reported by her as income in the year of receipt if the interest is vested.

Earl acquired a 20% interest in a partnership by contributing property that had an adjusted basis to him of $8,000 and that was subject to a mortgage of $12,000. Which of the following results is correct?

Capital Gain Recognized
$1,600
Basis of Partnership Interest
$0

Regarding family partnerships, if a husband and wife carry on a business together and share in the profits and losses,

Each spouse should carry his or her share of the partnership income or loss from the Form 1065, Schedule K-1, to his or her joint or separate individual income tax returns.

Tri-State Partnership has a fiscal year ending June 30. The partnership's four partners have the following ownership percentages and fiscal years:
Boulder
40% Owner
March 31
Granite
30% Owner
December 31
Shale
20% Owner
June 30
Slate
10% Owner
June 30
Ass

December 31.

Maggie and Simon each have a 50% interest in a partnership that started business October 1. Maggie uses a calendar year while Simon has a fiscal year ending November 30. Which of the following is true?

The partnership may use the fiscal year ending September 30 provided a Sec. 444 election and payment are made, and the partnership may use the fiscal year ending November 30 as that results in the least deferral.

Bob and Bill form a partnership with cash contributions of $20,000 each. Bill is not a general partner. Under the partnership agreement, Bob and Bill share all partnership profits and losses equally. The partnership borrows $60,000 to purchase depreciable

Bob
$80,000
Bill
$20,000

In which of the following ownership combinations would Fred be treated as owning more than 50% of the partnership?

Fred
40%
Fred's nephew
20%
Fred's son
40%

The due date, without regard to extensions, of a domestic partnership filing U.S. Return of Partnership Income (Form 1065) is the 15th day of which month following the end of the tax year?

Third.

Rose and Irene each have a 50% interest in a partnership that started business on July 1. Rose uses a calendar year, while Irene has a fiscal year ending November 30. Which of the following is true?

The partnership must use the fiscal year ending November 30 because it results in a deferral of 1 month.

ABC Partnership was formed on March 1 of the current year by three individuals. A contributed $20,000 cash for a 25% interest. B contributed property with an adjusted basis of $28,000 and fair market value of $32,000, subject to a $12,000 mortgage. C cont

$0 gain, $25,000 basis.

Bill and Ted form a partnership with cash contributions of $40,000 each. Bill is not a general partner. Under the partnership agreement, Bill and Ted share all partnership profits and losses equally. The partnership borrows $100,000 from a local bank to p

Ted
$140,000
Bill
$40,000

Jeffrey, the sole proprietor of a hardware business, hired Eastwood on January 1, Year 1, for an agreed salary and a promise to give him a 25% ownership interest if he were still employed at the end of 3 years and an additional 25% interest if he continue

Basis for Partnership Interest
$15,000
Addition to Gross Income
$15,000

In determining the ownership rules of partnerships, which one of the following combinations would not total at least 50% ownership of The Desk Company for Joe?

Joe
40%
His cousin's trust
60%

A partnership, S corporation, or personal service corporation can elect to use a tax year other than its required tax year if it

Elects a year that meets the deferral period requirement
Is not a member of a tiered structure as defined by the regulations.
Has not previously had an election in effect to use a tax year other than its required tax year.

On March 10, Year 1, Daniel contributed land in exchange for a 25% partnership interest in Parr Company. The fair market value of the land at that time was $40,000, and Daniel's adjusted basis was $25,000. On December 2, Year 4, Parr distributed that land

$15,000
Under Sec. 704 (c)(1)(B), precontribution gain must be recognized if the contributed property is distributed to another partner within 7 years of the contribution. Accordingly, Daniel must recognize all of the precontribution gain of $15,000 ($40,

Which of the following would not total more than 50% ownership in T, F, & J Partnership for Ted?

Ted
40%
Ted's wife
5%
Ted's cousin
55%

The following information pertains to land contributed by Pink for a 50% interest in a new partnership:
Adjusted basis to Pink
$100,000
Fair market value
300,000
Mortgage assumed by partnership
30,000
The partnership has no other liabilities. The basis fo

$85,000

A and B formed a partnership by transferring the following assets to the partnership. A transferred $25,000 in cash and equipment, which cost $27,000, had an adjusted basis of $19,800, and had a fair market value of $30,000. B transferred cash of $50,000.

$19,800

Ed and Bob form a partnership with contributions of $30,000 each. Bob is not a general partner. Under the partnership agreement, Ed and Bob share all partnership profits and losses equally. The partnership borrows $70,000 to purchase depreciable equipment

Ed
$100,000
Bob
$30,000

On June 1 of the current year, Kelly received a 10% capital interest in Rock Co., a partnership, for services contributed to the partnership. Rock's net assets at that date had a basis of $70,000 and a fair market value of $100,000. In Kelly's current yea

$10,000 ordinary income.

Phil and Dean formed a general partnership with cash contributions of $10,000 each. All partnership profits and losses are shared equally as stated in the partnership agreement. During the current year, they borrowed $30,000 to purchase depreciable equipm

$30,000

Mr. J had an adjusted basis of $10,000 in a partnership at the beginning of the year. Both Mr. J and the partnership are calendar-year taxpayers. During the year, J received $12,000 in guaranteed payments for services he performed. During the same year, M

$4,000
Beginning basis
$10,000
Cash distribution
(4,000)
Decrease in liabilities
(2,000)
Basis on January 1 (next year)
$ 4,000

Western Enterprises, a general partnership, distributed $8,000 cash to Peter during the year. His adjusted basis (including his share of liabilities) in his partnership interest at the beginning of the year was $9,500. Peter's share of the partnership's t

$500

Crumbly Partnership sold a capital asset to Freeman Partnership at a loss of $50,000. Crumbly had held the property for 5 months. Crumbly is owned 30% by Doug, 30% by Fred, and 40% by Dale, Doug's brother. Freeman Partnership is owned 80% by ABC Corporati

$0

Phil and Don are equal partners in the Hilldale Company. Hilldale has a fiscal year ending on January 31. Phil and Don file their individual tax returns on a calendar year basis. For the tax year ending January 31, 2017, Hilldale had taxable income from t

$50,000

Sandy and Buffy formed the S&B Partnership in November of 2017. They began business operations in December 2017. During 2017, they incurred the following costs:
$2,500 to their attorney for negotiating and preparing the partnership agreement.
$250 for fil

$3,750

If any partner's interest in a partnership changes during the year, which of the following cash basis items of the partnership must be prorated on a daily basis to determine each partner's share of partnership income or loss?

Taxes.
Payments for services or for the use of property.
Interest.

Zeke is a partner in Butter and Egg Partnership. Zeke is to receive 40% of the partnership's income, but not less than $20,000. The partnership has a net income of $10,000 after deducting the $20,000 in Year 1. How much can the partnership deduct for Zeke

$8,000

On March 1 of the current year, Jordan, a member of a three-man equal partnership, bought securities from the partnership for $27,000, their market value. The securities had been acquired by the partnership for $15,000 on August 1 of the previous year. By

$4,000

Mike received a $10,000 guaranteed payment as a partner in XYZ Partnership on June 30, 2017. XYZ Partnership is on a fiscal year ending March 31. How much of the payment, if any, should Mike include on his individual income tax return for the tax year end

0

Marvel has an adjusted basis in a partnership interest of $25,000 before receiving a current distribution of $4,000 cash, inventory with an adjusted basis of $6,000 and a fair market value of $9,000, and land with a fair market value of $7,000 and an adju

$7,000
Beginning basis
$25,000
Less: Cash
(4,000)
Inventory
(6,000)
Land
(8,000)
Ending basis
$ 7,000

In 2017, Lakewood, a cash-basis partnership, incurred $8,100 of organizational expenses that were not paid until 2018. The partnership began business on 7/1/17 and elected to amortize organizational expenses over a 180-month period on its 2017 tax return.

$810

Jane Jerrard, who is single, is a 50% partner in AB Partnership. During 2017, AB placed in service Sec. 179 property having an adjusted basis to the partnership of $2,170,000. The partnership's total income for the year before the Sec. 179 deduction was $

$16,750

ABC is a calendar-year partnership with three partners: Alan, Bob, and Cathy. The profits and losses are shared in proportion to each partner's contributions. On January 1, the ratio was 90% for Alan, 5% for Bob, and 5% for Cathy. On December 1, Bob and C

Alan $1,020, Bob $90, Cathy $90.

Under terms of the partnership agreement, Joyce is entitled to a fixed annual payment of $20,000 and her partner $30,000 without regard to the income of the partnership. Joyce's distributive share of the partnership income is 10%. The partnership income i

$26,000
$20,000
guaranteed
+ 6,000
($60,000 income � 10% share)
$26,000

Franklin Poppin owns a 60% interest in Corn Partnership and a 55% interest in Loblolly Partnership. In May of the current year, Corn sold land to Loblolly for $85,000. The land has a basis to Corn of $100,000. In June, Loblolly sold the land to an unrelat

$25,000 gain

In 2017, Greg and Elaine formed Spring Lawn, Ltd., a calendar year partnership, to provide yard maintenance to residential customers. Before they began operations on May 1, 2017, they incurred legal fees of $5,600 and consulting expenses of $3,000 to draf

$5,160

On March 10, Year 1, Daniel contributed land in exchange for a 25% partnership interest in Parr Company. The fair market value of the land at that time was $40,000, and Daniel's adjusted basis was $25,000. On December 2, Year 3, Parr distributed that land

$0

The M and M Partnership made a current distribution to Mac, a partner owning 50% of the partnership, of land with a fair market value of $6,000 (adjusted basis of $4,000) and a building with a fair market value of $100,000 (adjusted basis $40,000). This d

No gain or loss.

Under the terms of a partnership agreement, William's distributive share of the partnership's income and losses is 20%. Which of the following situations reflects an incorrect method of reporting guaranteed payments?

William is entitled to a fixed annual payment of $15,000 without regard to the partnership's income. The partnership has a $20,000 loss after deducting the guaranteed payment. William should include an ordinary loss of $1,000.

Sylvester owns farm machinery that has a fair market value of $157,000 and an adjusted basis of $90,000. The farm machinery is subject to a liability of $47,000. Dorene would like to purchase Sylvester's farm machinery and makes the following offer
Cash -

$67,000

Which of the following transactions qualifies as a like-kind exchange?

An exchange of land improved with an apartment house for land improved with a store building.

Brett transferred an automobile used in his business to Jim, an employee, as payment for services. The value of the services provided by Jim was $7,000. At the time of the transfer, the automobile had a fair market value of $8,000 and an adjusted basis to

Wage expense $8,000; gain on sale $2,000

Hazel purchased a new business asset (five-year property) on November 30, 2XX7, at a cost of $100,000. This was the only asset acquired by Hazel during 2XX7. On January 7, 2XX8, Hazel placed the asset in service. She did not elect to expense any of the as

$16,000.

Sec. 1245 property includes all of the following depreciable properties except

An office building placed in service in 1994.

Jerome owns a building held for investment purposes that has an adjusted basis to him of $150,000 and a fair market value of $430,000. This building is subject to a mortgage of $90,000. Jake would like to purchase Jerome's building and makes the following

$140,000

On January 2 of the current year, Mr. Quick, a sole proprietor, purchased a new van to be used in his business. He traded in a used van with an adjusted basis of $2,500 and paid $7,500 cash. He did not elect a Sec. 179 deduction for the van. Assuming the

$7,500

Kayla exchanged her unimproved land with an adjusted basis of $80,000 and a fair market value of $130,000 for unimproved land with a fair market value of $100,000 and $10,000 in cash. Kayla also paid $5,000 in closing costs. The unimproved land that Kayla

$55,000

Ms. N's business building was destroyed by a hurricane. The building had an adjusted basis to Ms. N of $200,000 and a fair market value immediately before the hurricane of $300,000. Ms. N received a reimbursement of $270,000 from her insurance company and

$2,000 gain.

Fourteen years ago, Mr. H bought a building for use in his business. He demolished the building in the current year at a cost of $5,000 because repairs were abnormally high and he had an opportunity to rent the land at an acceptable fee. Which of the foll

Neither this $5,000 nor the undepreciated basis of the building demolished is deductible for tax

Strom acquired a 25% interest in Ace Partnership by contributing land having an adjusted basis of $16,000 and a fair market value of $50,000. The land was subject to a $24,000 recourse mortgage, which was assumed by Ace. No other liabilities existed at th

0

The holding period of a partnership interest acquired in exchange for a contributed capital asset begins on the date

The partner's holding period of the capital asset began.

Nolan designed Timber Partnership's new building. Nolan received an interest in the partnership for the services. Nolan's normal billing for these services would be $80,000, and the fair market value of the partnership interest Nolan received is $120,000.

$120,000

Which of the following should be used in computing the basis of a partner's interest acquired from another partner?
cash paid by transferee to transferor
transferee's share of partnership liabilities

yes
yes

In the current year, Dave Burr acquired a 20% interest in a partnership by contributing a parcel of land. At the time of Burr's contribution, the land had a fair market value of $35,000, had an adjusted basis to Burr of $8,000, and was subject to a mortga

$0

Lee inherited a partnership interest from Dale. The adjusted basis of Dale's partnership interest was $50,000, and its fair market value on the date of Dale's death (the estate valuation date) was $70,000. What was Lee's original basis for the partnership

$70,000

Dale's distributive share of income from the calendar-year partnership of Dale & Eck was $50,000 in 2019. On December 15, 2019, Dale, who is a cash-basis taxpayer, received a $27,000 distribution of the partnership's 2019 income, with the $23,000 balance

$50,000

Which of the following limitations will apply in determining a partner's deduction for that partner's share of partnership losses if the partner is an individual?
at risk
passive loss

yes
yes

Partners Ann, Bob, and Carol of ABC, a calendar-year partnership, share partnership profits and losses in a ratio of 5:3:2, respectively. All three materially participate in the partnership business. Each partner's adjusted basis in the partnership as of

ann 19000
bob 15000
carol 9000

ABC is a calendar-year partnership with three partners, Alan, Bob, and Cathy. The profits and losses are shared in proportion to each partner's contributions. On January 1, the ratio was 90% for Alan, 5% for Bob, and 5% for Cathy. On December 1, Bob and C

Alan $1,020, Bob $90, Cathy $90.

Freeman, a single individual, reported the following income in the current year:
Guaranteed payment from services rendered to a partnership
$50,000
Ordinary income from an S corporation
20,000
What amount of Freeman's income is subject to self-employment

$50,000

For the year ended December 31, 2019, the partnership of Murray and Parker had book income of $100,000, which included the following:
Long-term capital gain
$ 7,000
Section 1231 loss
(3,000)
Dividends
200
Interest paid to partners for use of capital
12,00

$47,900

Doug sold 50% of his business to his son, Ben. The resulting partnership had an operating income of $60,000. Capital is a material income-producing factor. Doug performed services worth $24,000, which is reasonable compensation, and Ben performed no servi

$18,000

In 2019, Barb and Bet Partnership sold land having a $45,000 basis to the PTA Partnership for $35,000. Pat has a 55% capital and profits interest in the PTA Partnership, and his sister owns 60% of Barb & Bet Partnership. In 2020, the PTA Partnership sells

2019: $0
2020: $0

Flagg and Miles are each 50% partners in Decor Partnership. Each partner had a $200,000 tax basis in the partnership on January 1, 2019. Decor's 2019 net business income before guaranteed payments was $45,000. During 2019, Decor made a $7,500 guaranteed p

$18,750

Peterson has a one-third interest in the Spano Partnership. During 2019, Peterson received a $16,000 guaranteed payment, which was deductible by the partnership, for services rendered to Spano. Spano reported a 2019 operating loss of $70,000 before the gu

II only.

Nash and Ford are partners who share profits and losses equally. For the year ended December 31, 2019, the partnership had book income of $80,000, which included the following deductions:
Guaranteed salaries to partners:
Nash
$35,000
Ford
25,000
Charitabl

$85,000

Gilroy, a calendar-year taxpayer, is a long-time partner in the firm of Adam and Company, which has a fiscal year ending June 30. The partnership agreement provides for Gilroy to receive 25% of the ordinary business income of the partnership. Gilroy also

$34,000

Mike received a $10,000 guaranteed payment as a partner in XYZ Partnership on June 30, 2019. XYZ Partnership is on a fiscal year ending March 31. How much of the payment, if any, should Mike include on his individual income tax return for the tax year end

$0

Doug sold 50% of his business to his son, Ben. The resulting partnership had an operating income of $60,000. Capital is a material income-producing factor. Doug performed services worth $24,000, which is reasonable compensation, and Ben performed no servi

$18,000

On January 4, 2019, Smith and White contributed $4,000 and $6,000 in cash, respectively, and formed the Macro General Partnership. The partnership agreement allocated profits and losses 40% to Smith and 60% to White. In 2019, Macro purchased property from

Increases Smith's partnership basis by $16,000.

When a partner's share of partnership liabilities increases, the partner's basis in the partnership

Increases by the partner's share of the increase.

At the beginning of 2019, Paul owned a 25% interest in Associates Partnership. During the year, a new partner was admitted, and Paul's interest was reduced to 20%. The partnership liabilities at January 1, 2019, were $150,000 but decreased to $100,000 at

Decreased by $17,500.

Zachary invested $20,000 for a 30% interest in RST Partnership in the current year. At the same time, Andrea contributed property with a fair market value of $30,000, subject to a $10,000 liability (which the partnership assumed) for a 30% interest. Zacha

$19,000

PDK, LLC, had three members with equal ownership percentages. PDK elected to be treated as a partnership. For the tax year ending December 31, Year 1, PDK had the following income and expense items:
Revenues
$120,000
Interest income
6,000
Gain on sale of

$35,000

The following information pertains to land contributed by Pink for a 50% interest in a new partnership:
Adjusted basis to Pink
$100,000
Fair market value
300,000
Mortgage assumed by partnership
30,000
The partnership has no other liabilities. The basis fo

$85,000

Bill and Ted form a partnership with cash contributions of $40,000 each. Bill is a limited partner. Under the partnership agreement, Bill and Ted share all partnership profits and losses equally. The partnership borrows $100,000 from a local bank to purch

ted 140000
bill 40000

Baker is a partner in BDT with a partnership basis of $60,000. BDT made a liquidating distribution of land with an adjusted basis of $75,000 and a fair market value of $40,000 to Baker. What amount of gain or loss should Baker report?

$0

Fact Pattern:The adjusted basis of Jody's partnership interest was $50,000 immediately before Jody received a current distribution of $20,000 cash and property with an adjusted basis to the partnership of $40,000 and a fair market value of $35,000.
What i

$30,000

The adjusted basis of Stan's partnership interest is $15,000. He receives a distribution of cash of $6,000 and property with an adjusted basis to the partnership of $11,000. (This was not a distribution in liquidation.) What is the basis of the distribute

9000

The adjusted basis of Vance's partnership interest in Lex Associates was $180,000 immediately before receiving the following distribution in complete liquidation of Lex:
Fair Market
Basis to Lex
Value
Cash
$100,000
$100,000
Real estate
70,000
96,000
What

80,000

Ryan's adjusted basis in his Lux Partnership interest was $18,000 at the time Ryan received the following nonliquidating distributions of partnership property:
Cash
$10,000
Land
Adjusted basis
14,000
Fair market value
20,000
What is Ryan's tax basis in th

8,000

The CSU partnership distributed to each partner cash of $4,000, inventory with a basis of $4,000 and a fair market value (FMV) of $6,000, and land with an adjusted basis of $5,000 and a FMV of $3,000 in a liquidating distribution. Partner Chang had an out

$1,000 ordinary gain and $1,000 capital loss.

For tax purposes, a retiring partner who receives retirement payments ceases to be regarded as a partner

Only after the partner's entire interest in the partnership is liquidated.

Belson and Forman decided to terminate North partnership. On the date of termination, North's balance sheet was as follows:
Adjusted Basis
Cash
$2,000
Equipment (fair market value $4,000)
6,000
Capital � Belson
4,000
Capital � Forman
4,000
Forman's outsid

$1,000

T. Palms has a basis of $20,000 for her one-third interest in a partnership. The partnership has no liabilities, cash of $22,000, and property with a partnership basis of $38,000 and fair market value of $44,000. For her one-third interest, Palms receives

$40,000

David Beck and Walter Crocker were equal partners in the calendar-year partnership of Beck & Crocker. On July 1, Year 1, Beck died. Beck's estate became the successor in interest and continued to share in Beck & Crocker's profits until Beck's entire partn

April 30, Year 2.