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Federal Taxation

Business

Quiz 11 :

Partnerships and Limited Liability Entities

Quiz 11 :

Partnerships and Limited Liability Entities

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JLK Partnership incurred $6,000 of organizational costs and $50,000 of startup costs in 2013.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.
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True False
Answer:

Answer:

False

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Seven years ago,Paul purchased residential rental estate that he has been depreciating as MACRS property over 27.5 years.This year,when his adjusted basis in the property was $250,000,Paul transferred the property to the newly formed PLA LLC in exchange for a one-third interest in the LLC.PLA incurred $10,000 of transfer taxes and fees related to the property.PLA must treat the $260,000 basis in the property,fees,and expenses,as new MACRS property depreciable over 27.5 years.
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True False
Answer:

Answer:

False

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Ken and Lars formed the equal KL Partnership during the current year,with Ken contributing $100,000 in cash and Lars contributing land (basis of $60,000,fair market value of $40,000)and equipment (basis of $0,fair market value of $60,000).Lars recognizes a $40,000 gain on the contribution and his basis in his partnership interest is $100,000.
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True False
Answer:

Answer:

False

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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 False
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An example of the "aggregate concept" underlying partnership taxation is the fact that the partners (rather than the partnership)pay tax on partnership income.
True False
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Morgan and Kristen formed an equal partnership on August 1 of the current year.Morgan contributed $60,000 cash and land with a basis of $18,000 and a fair market value of $40,000.Kristen contributed equipment with a basis of $42,000 and a value of $100,000.Kristen and Morgan each have a basis of $100,000 in their partnership interests.
True False
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The "inside basis" is defined as a partner's basis in the partnership interest.
True False
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The taxable income of a partnership flows through to the partners,who report the income on their tax returns.
True False
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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 subject to normal operating risks.George will report ordinary income equal to the fair market value of the profits interest,but the capital interest will not be currently taxed to him.
True False
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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 False
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In a limited liability company,all members are protected from all debts of the partnership unless they personally guaranteed the debt.
True False
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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 the property contribution is made.
True False
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Each partner's profit-sharing,loss-sharing,and capital-sharing ownership percentages are always the same.
True False
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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 § 199 deduction,and the § 754 election.
True False
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Laura is a real estate developer and owns property that is treated as inventory (not a capital asset)in her business.She contributes a parcel of this land (basis of $15,000)to a partnership,also to be held as inventory.The fair market value of the property is $12,000 at the contribution date.After three years,the partnership sells the land for $10,000.The partnership will recognize a $5,000 ordinary loss on sale of the property.
True False
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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.
True False
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A limited partnership offers all partners protection from claims by the LP's creditors.
True False
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If the partnership properly makes an election for treatment of a specific tax item,the partner is bound by that treatment.
True False
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The partnership reports each partner's share of income to the partner in a single amount on Form 1099.
True False
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Syndication costs arise when partnership interests are being marketed to investors.These costs cannot be amortized or deducted.
True False
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