Deck 15: Partnerships

Question 1

Yes Co.and No Co.are equal partners in Maybe Enterprises.The partnership has a net worth of $210,000, split 50/50 between the two corporations.Decision Co.has been asked to join the partnership.When the transaction is complete, all three partners will have an equal interest.To accomplish this structural change, Decision will contribute $105,000 to the partnership treasury.This transaction will

A)dilute the original partners' interests.
B)increase the original partners' interests.
C)result in a capital gain for the partners.
D)result in a capital loss for the partners.

Answer 1

A

Question 2

Which of the following statements regarding partnerships is true?

A)Partners must contribute equal portions of capital to the partnership.
B)It is possible that a minority partner will have significant influence over the partnership.
C)A holding corporation cannot act as a partner.
D)A general partnership is a protected legal entity, separate from the partners' affairs.

Answer 2

B

Question 3

Tyran Lobell and Scotti Wand are equal general partners in The Gift Shop.Tyran contributed 80% ($80,000) of the required funds to start the partnership and Scotti contributed 20% ($20,000).Scotti carries out 75% of the day to day operations of the business.Which of the following is accurate with respect to the partners' liability exposure?

A)Scotti is liable for 75% of any claims made.
B)Tyran is liable for 80% of any claims made.
C)Any claims against the business will be limited to $100,000.
D)The partners have equal and unlimited liability in the business.

Answer 3

D

Question 4

Aubrey Richards and Tashi Pasang would like to start a business in 2021 with equal contributions of $75,000.They will split any profits and losses equally.Aubrey and Tashi would like to know whether a partnership or a corporation would be the best form of business strictly from a tax perspective in light of other income to be received in 2021.Neither would not take any form of payment from the company in the first year.
The following information (which is the same for both Aubrey and Tashi) is available for 2021 projections:
Employment income = $100,000
Interest income = $5,000
A business loss of $25,000 is anticipated in Year 1 for the new company.
Aubrey and Tashi both have a personal marginal tax rate of 45%.The small business corporate tax rate is 12%.
Required:
Which form of business will be most beneficial to Aubrey and Tashi from a tax liability perspective in Year 1?

Question 5

Partnerships are required to file annual T5013's with information pertaining to the partnership.
Required:
Indicate the due dates of the T5013s for the following scenarios?
A.Sky Co.and Land Co.are partners in Waterways.The fiscal year-end of the business is March 31.
B.Toni Lemon and Rachel Bonnet are partners in The Food Truck.The fiscal year-end of the business is December 31.
C.Sand Co.and Howie Meintzer are partners in The Glass Shop.The fiscal year-end of the business is December 31.

Question 6

Which of the following statements regarding partnerships is true?

A)Partnership income is taxed in the partnership.
B)Partnership losses cannot be offset against the partners' other income.
C)Partnership income is included in a partner's income in the year of disbursement.
D)Partnerships may earn business income, property income, and capital gains.

Question 7

Green Co.and Blue Co.are equal partners in Turtle Books.Turtle Books had a net income for tax purposes this year of $300,000, before deducting capital cost allowance.
Green Co.is a CCPC owned by Drew Alvarez.Green's net income for tax purposes is $200,000.
Blue Co.is a CCPC owned by Quinn Kano.Blue Co.has suffered net losses the past two years.This year Blue Co.had a loss of $150,000, and the company has non-capital losses of $200,000 which will expire in two years.
The capital cost allowance for Turtle Books this year is $72,000.
Required:
Based solely on the facts provided:
A.Calculate the partnership net income for tax purposes that Drew would likely prefer to use, and explain why.
B.Calculate the partnership net income for tax purposes that Quinn would likely prefer to use, and explain why.

Question 8

Trish Potter is a 40% partner in The Rose Garden.The ACB of Trish's partnership interest at the beginning of 2020 was $50,000.During 2020, the partnership earned business income of $200,000 and a taxable capital gain of $12,000.Trish withdrew $10,000 from the partnership for personal expenses during the year.What is the ACB of Trish's partnership interest at the beginning of 2021?

A)$124,800
B)$129,600
C)$252,000
D)$264,000

Question 9

Mohamed Khan and Aaron Grieve are equal partners in a small business which received the following income in 2020: business income of $150,000, non-eligible dividends of $4,000, and a capital gain of $10,000.Mohamed withdrew $20,000 from the partnership during 2020 and Aaron withdrew $25,000.Which of the following is correct for the 2020 taxation year?

A)Mohamed's net income for tax purposes from the business is $59,800 and Aaron's net income for tax purposes is $54,800.
B)Both partners have a net income for tax purposes from the business of $79,500.
C)Both partners have a net income for tax purposes from the business of $79,800.
D)Both partners have a net income for tax purposes from the business of $82,000.

Question 10

Banting Co.and Smithers Co.have entered into a partnership for business purposes.Both companies are CCPCs and they share the profits and losses of the business equally.During the year, the partnership earned $200,000 of active business income, and Banting earned $450,000 in business income from operations other than the partnership.All of the companies have a December 31^st year-end.How much of Banting's share of the partnership profits will be eligible for the small business deduction (assuming all of the $450,000 is allocated to the deduction)?

A)$0
B)$50,000
C)$100,000
D)$200,000