Question 1

Ryan is a 25% partner in the ROCC Partnership.At the beginning of the tax year, Ryan's basis in the partnership interest was $90,000, including his share of partnership liabilities.During the current year, ROCC reported net ordinary income of $100,000.In addition, ROCC distributed $10,000 to each of the partners ($40,000 total) .At the end of the year, Ryan's share of partnership liabilities increased by $10,000.Ryan's basis in the partnership interest at the end of the year is:

Accepted Answer

A)  $90,000.
B)  $100,000.
C)  $115,000.
D)  $125,000.E) B) and D)
F) B) and C) C

Question 2

Match each of the following statements with the terms below that provide the best definition.
-§ 179 deduction

Accepted Answer

A)  Adjusted basis of each partnership asset.
B)  Operating expenses incurred after entity is formed but before it begins doing business.
C)  Each partner's basis in the partnership.
D)  Reconciles book income to "taxable income."
E)  Tax accounting election made by partnership.F) Tax accounting calculation made by partner.G) Tax accounting election made by partner.H) Does not include liabilities.I) Designed to prevent excessive deferral of taxation of partnership income.J) Amount that may be received by partner for performance of services for the partnership.K) Theory under which a partnership's recourse debt is shared among the partners.L) Will eventually be allocated to partner making tax-free property contribution to partnership.M) Partner's share of partnership items.N) Must generally be satisfied by any allocation to the partners.O) Justification for a tax year other than the required taxable year.P) No correct match is provided.Q) C) and H)
R) A) and E)

Question 3

PaulCo, DavidCo, and Sean form a partnership with cash contributions of $80,000, $50,000 and $30,000, respectively, and agree to share profits and losses in the ratio of their original cash contributions.PaulCo uses a January 31 fiscal year-end, while DavidCo and Sean use a November 30 and December 31 year-end, respectively.The partnership must use the least aggregate deferral method to determine its year end.

Accepted Answer

A) True 
 B)False

Question 4

Match each of the following statements with the terms below that provide the best definition.
-Inside basis

Accepted Answer

A)  Adjusted basis of each partnership asset.
B)  Operating expenses incurred after entity is formed but before it begins doing business.
C)  Each partner's basis in the partnership.
D)  Reconciles book income to "taxable income."
E)  Tax accounting election made by partnership.F) Tax accounting calculation made by partner.G) Tax accounting election made by partner.H) Does not include liabilities.I) Designed to prevent excessive deferral of taxation of partnership income.J) Amount that may be received by partner for performance of services for the partnership.K) Theory under which a partnership's recourse debt is shared among the partners.L) Will eventually be allocated to partner making tax-free property contribution to partnership.M) Partner's share of partnership items.N) Must generally be satisfied by any allocation to the partners.O) Justification for a tax year other than the required taxable year.P) No correct match is provided.Q) K) and M)
R) C) and L)

Question 5

On a corporate Form 1120, Schedule M-1 (or M-3) is used to reconcile book and tax income, and Schedule M-2 reconciles retained earnings to the amounts shown on Schedule L.How are these reconciliations accomplished on a partnership return? What additional information must be provided?

Accepted Answer

A partnership is not a taxpaying entity ...

Question 6

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

Accepted Answer

A) True 
 B)False  True

Question 7

Kristie is a 30% partner in the KKM Partnership.During the current year, KKM reported gross receipts of $280,000 and a charitable contribution of $30,000.The partnership paid office expenses of $80,000.In addition, KKM distributed $20,000 each to partners Kaylyn and Megan, and the partnership paid partner Kaylyn $20,000 for administrative services.Kristie reports the following income from KKM during the current tax year:

Accepted Answer

A)  $54,000 ordinary income; $9,000 charitable contribution.
B)  $60,000 ordinary income; $9,000 charitable contribution.
C)  $36,000 ordinary income.
D)  $54,000 ordinary income.E) B) and D)
F) A) and D) A

Question 8

Which of the following is not a correct statement regarding the advantage of the partnership entity form over the C corporation form?

Accepted Answer

A)  A partnership typically has easier administrative and filing requirements than does a C corporation.
B)  Partnership income is subject to a single level of taxation; corporate income is double taxed.
C)  Partnerships may specially allocate income and expenses among the partners, provided the substantial economic effect requirements are met; corporate dividends must be proportionate to shareholdings.
D)  Partners in a general partnership have less personal liability for entity claims than shareholders of a C corporation.
E)  All of the above are advantages of partnership taxation.F) B) and D)
G) B) and C)

Question 9

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

Accepted Answer

A)  The partnership acquires the asset through a § 1031 like-kind exchange.
B)  A partner owning 25% of partnership capital and profits sells the asset to the partnership.
C)  The partnership leases the asset from a partner on a one-year lease.
D)  The partnership acquires the asset from a partner as a contribution to partnership capital under § 721(a) .E) A) and B)
F) None of the above

Question 10

Harry and Sally are considering forming a partnership.Both taxpayers use the calendar year and are cash basis taxpayers.The partnership will not be a tax shelter.The partners are uncertain as to whether the partnership should use the cash or accrual method of accounting.Moreover, the idea of a tax deferral in the first year of operations has led them to consider using a June 30 fiscal year-end for the partnership.
​
As their tax adviser, identify the issues that must be considered in selecting an accounting method and tax year for the partnership.

Accepted Answer

Because neither partner is a C corporati...

Question 11

Match each of the following statements with the terms below that provide the best definition.
-Profits interest

Accepted Answer

A)  Organizational choice of many large accounting firms.
B)  Partner's percentage allocation of current operating income.
C)  Might affect any two partners' tax liabilities in different ways.
D)  Brokerage and registration fees incurred for promoting and marketing partnership interests.
E)  Transfer of asset to partnership followed by immediate distribution of cash to partner.F) Must have at least one general and one limited partner.G) All partners are jointly and severally liable for entity debts.H) Theory treating the partner and partnership as separate economic units.I) Partner's basis in partnership interest after tax-free contribution of asset to partnership.J) Partnership's basis in asset after tax-free contribution of asset to partnership.K) Owners are "members."L) Theory treating the partnership as a collection of taxpayers joined in an agency relationship.M) Allows many unincorporated entities to select their Federal tax status.N) No correct match provided.O) G) and N)
P) C) and M)

Question 12

JLK Partnership incurred $6,000 of organizational costs and $50,000 of startup costs in 2016.JKL may deduct $5,000 each of organizational and startup costs, and the remaining costs ($1,000 of organizational costs and $45,000 of startup costs) may be amortized over 60 months.

Accepted Answer

A) True 
 B)False

Question 13

What are "syndication costs" and how are they treated for tax purposes?

Accepted Answer

Syndication costs are costs incurred in ...

Question 14

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 the service partner.)

Accepted Answer

A)  A 10% interest in the capital of the partnership that will vest in 3 years.
B)  A 20% interest in the future profits of the partnership received in exchange for future services to be performed for the partnership.
C)  A 25% interest in the capital of the partnership where there are no restrictions on transferability of the interest.
D)  All of the above.E) B) and C)
F) A) and D)

Question 15

Match each of the following statements with the terms below that provide the best definition.
-Syndication costs

Accepted Answer

A)  Organizational choice of many large accounting firms.
B)  Partner's percentage allocation of current operating income.
C)  Might affect any two partners' tax liabilities in different ways.
D)  Brokerage and registration fees incurred for promoting and marketing partnership interests.
E)  Transfer of asset to partnership followed by immediate distribution of cash to partner.F) Must have at least one general and one limited partner.G) All partners are jointly and severally liable for entity debts.H) Theory treating the partner and partnership as separate economic units.I) Partner's basis in partnership interest after tax-free contribution of asset to partnership.J) Partnership's basis in asset after tax-free contribution of asset to partnership.K) Owners are "members."L) Theory treating the partnership as a collection of taxpayers joined in an agency relationship.M) Allows many unincorporated entities to select their Federal tax status.N) No correct match provided.O) A) and K)
P) B) and L)

Question 16

Match each of the following statements with the terms below that provide the best definition.
-Foreign tax credit vs.deduction

Accepted Answer

A)  Adjusted basis of each partnership asset.
B)  Operating expenses incurred after entity is formed but before it begins doing business.
C)  Each partner's basis in the partnership.
D)  Reconciles book income to "taxable income."
E)  Tax accounting election made by partnership.F) Tax accounting calculation made by partner.G) Tax accounting election made by partner.H) Does not include liabilities.I) Designed to prevent excessive deferral of taxation of partnership income.J) Amount that may be received by partner for performance of services for the partnership.K) Theory under which a partnership's recourse debt is shared among the partners.L) Will eventually be allocated to partner making tax-free property contribution to partnership.M) Partner's share of partnership items.N) Must generally be satisfied by any allocation to the partners.O) Justification for a tax year other than the required taxable year.P) No correct match is provided.Q) E) and P)
R) G) and I)

Question 17

Your client owns a parcel of land that has depreciated in value.He wants to know if there is a way he can contribute the property to his partnership, have the partnership sell the property, and convert the existing capital loss into an ordinary loss.He also wants to know if part of the loss would be allocated to his other partners.What is your reaction?

Accepted Answer

In the short run, it would not be possib...

Question 18

The LN partnership reported the following items of income and deduction during the current tax year: revenues, $300,000; cost of goods sold, $180,000; tax-exempt interest income, $2,000; salaries to employees, $80,000; and long-term capital gain, $10,000.In addition, the partnership distributed $20,000 of cash to 50% partner Nina and $10,000 of cash to 50% partner Len.What is Nina's share of ordinary partnership income and separately stated items?

Accepted Answer

? \[\begin{array} { l r }
\text { Reven ...

Question 19

The MOP Partnership is involved in construction activities.Patricia has an adjusted basis for her partnership interest on January 1 of the current year of $600,000, consisting of the following. $$\begin{array} { l r } 
\text { Capital account } & \$ 350,000 \
\text { Share of partnership recourse debt } & 50,000 \
\text { Share of partnership nonrecourse debt } & 200,000 \
& \$ 600,000
\end{array}$$ ​
During the year, the partnership has an operating loss of $1.2 million and distributes $60,000 of cash to Patricia.Partnership liabilities were the same at the end of the tax year, and the nonrecourse debt is not "qualified nonrecourse debt." If she owns a 60% share of partnership profits, capital, and losses, and is an active ("material") participant in the partnership, how much of her share of the operating loss can Patricia deduct? What Code provisions could cause a suspension of the loss? How would your answer change if MOP were an LLC and Patricia had not personally guaranteed any of the debt?

Accepted Answer

Patricia can only deduct $340,000 of her...

Question 20

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.

Accepted Answer

A) True 
 B)False

Exam 14: Partnerships and Limited Liability Entities

Correct Answer
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C

Match each of the following statements with the terms below that provide the best definition. -§ 179 deduction

Correct Answer
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Correct Answer
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Match each of the following statements with the terms below that provide the best definition. -Inside basis

Correct Answer
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On a corporate Form 1120, Schedule M-1 (or M-3) is used to reconcile book and tax income, and Schedule M-2 reconciles retained earnings to the amounts shown on Schedule L.How are these reconciliations accomplished on a partnership return? What additional information must be provided?

Correct Answer
verified
A partnership is not a taxpaying entity ...
View Answer

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

Correct Answer
verified
True

Correct Answer
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A

Which of the following is not a correct statement regarding the advantage of the partnership entity form over the C corporation form?

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

Correct Answer
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Correct Answer
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Because neither partner is a C corporati...
View Answer

Match each of the following statements with the terms below that provide the best definition. -Profits interest

Correct Answer
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JLK Partnership incurred $6,000 of organizational costs and $50,000 of startup costs in 2016.JKL may deduct $5,000 each of organizational and startup costs, and the remaining costs ($1,000 of organizational costs and $45,000 of startup costs) may be amortized over 60 months.

Correct Answer
verified

What are "syndication costs" and how are they treated for tax purposes?

Correct Answer
verified
Syndication costs are costs incurred in ...
View Answer

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 the service partner.)

Correct Answer
verified

Match each of the following statements with the terms below that provide the best definition. -Syndication costs

Correct Answer
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Match each of the following statements with the terms below that provide the best definition. -Foreign tax credit vs.deduction

Correct Answer
verified

Correct Answer
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In the short run, it would not be possib...
View Answer

Correct Answer
verified
? \[\begin{array} { l r }
\text { Reven ...
View Answer

Correct Answer
verified
Patricia can only deduct $340,000 of her...
View Answer

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.

Correct Answer
verified

Exam 14: Partnerships and Limited Liability Entities

Correct AnswerverifiedC

Match each of the following statements with the terms below that provide the best definition. -§ 179 deduction

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Match each of the following statements with the terms below that provide the best definition. -Inside basis

Correct AnswerverifiedShow Answer

On a corporate Form 1120, Schedule M-1 (or M-3) is used to reconcile book and tax income, and Schedule M-2 reconciles retained earnings to the amounts shown on Schedule L.How are these reconciliations accomplished on a partnership return? What additional information must be provided?

Correct AnswerverifiedA partnership is not a taxpaying entity ...View AnswerShow Answer

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

Correct AnswerverifiedTrue

Correct AnswerverifiedA

Which of the following is not a correct statement regarding the advantage of the partnership entity form over the C corporation form?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedBecause neither partner is a C corporati...View AnswerShow Answer

Match each of the following statements with the terms below that provide the best definition. -Profits interest

Correct AnswerverifiedShow Answer

JLK Partnership incurred $6,000 of organizational costs and $50,000 of startup costs in 2016.JKL may deduct $5,000 each of organizational and startup costs, and the remaining costs ($1,000 of organizational costs and $45,000 of startup costs) may be amortized over 60 months.

Correct AnswerverifiedShow Answer

What are "syndication costs" and how are they treated for tax purposes?

Correct AnswerverifiedSyndication costs are costs incurred in ...View AnswerShow Answer

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 the service partner.)

Correct AnswerverifiedShow Answer

Match each of the following statements with the terms below that provide the best definition. -Syndication costs

Correct AnswerverifiedShow Answer

Match each of the following statements with the terms below that provide the best definition. -Foreign tax credit vs.deduction

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIn the short run, it would not be possib...View AnswerShow Answer

Correct Answerverified ? \[\begin{array} { l r } \text { Reven ...View AnswerShow Answer

Correct AnswerverifiedPatricia can only deduct $340,000 of her...View AnswerShow Answer

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.

Correct AnswerverifiedShow Answer

Correct Answer
verified
C

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
A partnership is not a taxpaying entity ...
View Answer

Correct Answer
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True

Correct Answer
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A

Correct Answer
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Correct Answer
verified

Correct Answer
verified
Because neither partner is a C corporati...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Syndication costs are costs incurred in ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
In the short run, it would not be possib...
View Answer

Correct Answer
verified
? \[\begin{array} { l r }
\text { Reven ...
View Answer

Correct Answer
verified
Patricia can only deduct $340,000 of her...
View Answer

Correct Answer
verified