Question 1

Ariel receives from her partnership a nonliquidating distribution of $9,000 cash plus a parcel of land.The partnership had purchased the land five years ago for $20,000,but it is worth $28,000 at the time of the distribution.Ariel's predistribution basis is $17,000.How much income will Ariel recognize due to the distribution,and what is her basis in the land?

Accepted Answer

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Question 2

Joey and Bob each have 50% interest in a Partnership.Both Joey and the partnership file returns on a calendar year basis.Partnership Q had a $12,000 loss in 2013.Joey's adjusted basis in his partnership interest on January 1,2013 was $5,000.In 2014,the partnership had a profit of $10,000.Assuming there were no other adjustments to Joey's basis in the partnership,what amount of partnership income (loss)should Joey show on his 2013 and 2014 individual income tax returns?

Accepted Answer

- In 2013, the partnership had a $12,000 loss. Since Joey has a 50% interest, his share of the loss is $6,000 ($12,000 x 50%). However, since his adjusted basis in the partnership interest is only $5,000, he can only deduct up to the amount of his basis. Therefore, he should show a loss of $5,000 on his 2013 individual income tax return.
- In 2014, the partnership had a $10,000 profit. Again, since Joey has a 50% interest, his share of the profit is $5,000. However, since he had a $5,000 loss in 2013 that he was not able to fully deduct, he must first apply the 2013 loss carryover to the 2014 profit. This means his taxable income from the partnership in 2014 is $0. He should not show any partnership income on his 2014 individual income tax return.

Question 3

At the beginning of this year,Edmond and Samuel were equal partners in a partnership that uses the calendar year as its tax year.On October 1,this year,Joan contributed $48,000 cash for a one-third interest in the partnership.The interests of both Edmond and Samuel drop to one-third.The partnership reports a $36,000 ordinary loss for the current tax year ending December 31.The loss allocation to Samuel (one of the original partners)is

Accepted Answer

Since Joan contributed $48,000 for a one-third interest in the partnership on October 1, this year, the partnership existed for 9 months before October 1 and thus the original partners (Edmond and Samuel) were entitled to 9/12 (or 3/4) of the loss allocation. Therefore, the loss allocation for Edmond and Samuel would be (3/4) x $36,000 = $27,000.

Since Edmond and Samuel now both have one-third interests in the partnership, their share of the loss allocation is determined separately. Each of them would be allocated (1/3) x $36,000 = $12,000 of the loss.

Therefore, the loss allocation to Samuel (one of the original partners) is $12,000.

Question 4

Atiqa receives a nonliquidating distribution of land from her partnership.The partnership purchased the land five years ago for $20,000.At the time of the distribution,it is worth $28,000.Prior to the distribution,Atiqa's basis in her partnership interest is $37,000.Atiqa's basis in the distributed land her post-distribution basis in her partnership interest are:

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Question 5

Brittany receives a nonliquidating distribution of $48,000 cash from her partnership.Brittany's basis in her partnership interest prior to the distribution is $25,000.What are the tax consequences of the distribution?

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Question 6

Maxine has a 65% interest in a partnership.Maxine sells land to the partnership for $60,000.Prior to the sale,the land had a FMV of $60,000 and an adjusted basis of $90,000 to Maxine.Later,the partnership sells the land to an outsider for $110,000.The partnership must report a gain of

Accepted Answer

The partnership must report a gain of $20,000, which is the difference between the selling price to the outsider ($110,000) and the FMV at the time of the sale to the partnership ($90,000). The loss Maxine had on the sale to the partnership is not recognized due to her substantial interest in the partnership.

Question 7

Sandy and Larry each have a 50% interest in SL Partnership.The partnership and the individuals file on a calendar year basis.In 2013,SL Partnership had a $30,000 ordinary loss.Sandy's adjusted basis in her partnership interest on January 1,2013 was $12,000.In 2014,SL Partnership had ordinary income of $20,000.Assuming there were no other adjustments to Sandy's basis in the partnership,what amount of partnership income (loss)would Sandy show on her 2013 and 2014 individual income tax returns?

Accepted Answer

In 2013, Sandy's share of the partnership loss is $15,000 ($30,000 x 50%). Sandy's adjusted basis in her partnership interest at the end of 2013 is $-3,000 ($12,000 - $15,000).

In 2014, Sandy's share of the partnership income is $10,000 ($20,000 x 50%). Her adjusted basis at the end of 2014 is $7,000 ($-3,000 + $10,000).

Therefore, Sandy would show a $15,000 loss on her 2013 individual tax return and $10,000 of income on her 2014 individual tax return.

Question 8

Thomas and Miles are equal partners in a partnership,which uses the calendar year as its tax year.On September 1,this year,Katie contributed $60,000 cash for a one-third interest in the partnership.The partnership reports a $24,000 ordinary loss for the tax year ending on December 31 of this year.The loss allocation to Katie (new partner)is

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Question 9

All of the following are separately stated items that pass through from the partnership to the partners except

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Question 10

George transferred land having a $170,000 FMV and a $60,000 adjusted basis,which is subject to a $150,000 mortgage in exchange for a one-third interest in the GEF Partnership.The partnership owes no other liabilities.George,Elena,and Franz share profits and losses equally and each has a one-third interest in partnership capital.The basis to the partnership of the land transferred by George is

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Question 11

Ben is a 30% partner in a partnership.The partnership guarantees Ben payments of $25,000 for the year.If the partnership has ordinary income of $15,000 before adjustment for the guaranteed payment,Ben must report

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Question 12

All of the following statements are true with regard to the formation of a partnership except:

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Question 13

Martha transferred property with a FMV of $60,000 (adjusted basis $30,000),which is subject to a $40,000 mortgage in exchange for a one-third interest in a partnership.The partnership has no other liabilities.The partners of MNO own the partnership equally.The partnership's basis in the property contributed is

Accepted Answer

The partnership's basis in the contributed property is equal to the adjusted basis of the property to the contributing partner at the time of the contribution, which in this case is $30,000. The mortgage on the property is not taken into consideration when determining the partnership's basis.

Question 14

Clark and Lois formed an equal partnership three years ago.Clark contributed cash of $160,000 while Lois contributed land with a $90,000 adjusted basis and a $160,000 FMV.Three years later the land is sold for $210,000.The tax results to Clark and Lois are

Accepted Answer

When Lois contributed the land with a FMV of $160,000, she also contributed a basis of $90,000, which means she had a built-in gain of $70,000. When the land is sold for $210,000, Lois will recognize a gain of $70,000.

Since Clark and Lois are equal partners, Clark is also entitled to his share of the gains. Clark's basis in the partnership is $160,000, therefore his share of the gain is calculated as follows:

($210,000 - $90,000) / 2 = $60,000

Therefore, Clark recognizes a gain of $60,000 while Lois recognizes a gain of $70,000.

Total gain for the partnership is $130,000, with Clark and Lois each recognizing their share of the gain as noted above. Therefore, the correct answer is D: $25,000 of gain to Clark and $95,000 gain to Lois.

Question 15

David and Joycelyn form an equal partnership in the current year.No special allocation is provided for in the partnership agreement.During the year David contributes land having a $90,000 basis and a $100,000 FMV in exchange for the initial partnership interest.In addition,the partnership earns $50,000 of ordinary income while partnership liabilities increase from zero to $30,000 by the end of the tax year.The partnership earns $20,000 of tax-exempt interest during the year.David's basis at the end of the current year is

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Question 16

In the syndication of a partnership,brokerage and registration fees,printing fees,and legal fees of the underwriter total $50,000.With respect to these fees,the partnership must

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The answer of In the syndication of a partnership,brokerage and...

Question 17

All of the following statements are true regarding nonliquidating distributions of a partnership except:

Accepted Answer

Statement B is incorrect. Partners may recognize gain or loss from a nonliquidating distribution if the distribution exceeds the partner's basis in the partnership interest.

Question 18

Atiqa receives a nonliquidating distribution of land from her partnership.The partnership purchased the land five years ago for $20,000.At the time of the distribution,it is worth $28,000.Prior to the distribution,Atiqa's basis in her partnership interest is $37,000.Due to the distribution Atiqa and the partnership will recognize income of

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Question 19

Richard has a 50% interest in a partnership,and he materially participates in the partnership's business.Richard's adjusted basis in the partnership was $60,000 at the beginning of the year,including his share of partnership liabilities.There were no distributions to Richard during the year.During the current year,the partnership borrowed $160,000 from a local bank to purchase equipment needed in the business.All of the partners are personally liable for all partnership debts.The partnership incurred a $320,000 loss this year.What amount can Richard claim as a loss from the partnership on his individual tax return this year?

Accepted Answer

As Richard materially participates in the partnership's business, he can claim the entire loss of $320,000. However, his loss deduction is limited to his adjusted basis in the partnership. His adjusted basis was $60,000, and he did not receive any distributions during the year. Therefore, he can deduct up to $60,000 of the loss in the current year. The remaining loss of $260,000 can be carried forward to future years and deducted against any increase in his basis or if he receives a distribution. Therefore, Richard can claim a loss of $60,000 in the current year.

Question 20

On April 4,2013,Joan contributes business equipment (she had purchased on October 23,2010)having a $45,000 FMV and a $40,000 adjusted basis to the EJK Partnership in exchange for a 25% interest in the capital and profits.The basis of the property and the date the holding period begins for the partnership is

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Quiz 17: Partnerships and S Corporations

Brittany receives a nonliquidating distribution of $48,000 cash from her partnership.Brittany's basis in her partnership interest prior to the distribution is $25,000.What are the tax consequences of the distribution?

Maxine has a 65% interest in a partnership.Maxine sells land to the partnership for $60,000.Prior to the sale,the land had a FMV of $60,000 and an adjusted basis of $90,000 to Maxine.Later,the partnership sells the land to an outsider for $110,000.The partnership must report a gain of

All of the following are separately stated items that pass through from the partnership to the partners except

Ben is a 30% partner in a partnership.The partnership guarantees Ben payments of $25,000 for the year.If the partnership has ordinary income of $15,000 before adjustment for the guaranteed payment,Ben must report

All of the following statements are true with regard to the formation of a partnership except:

Clark and Lois formed an equal partnership three years ago.Clark contributed cash of $160,000 while Lois contributed land with a $90,000 adjusted basis and a $160,000 FMV.Three years later the land is sold for $210,000.The tax results to Clark and Lois are

In the syndication of a partnership,brokerage and registration fees,printing fees,and legal fees of the underwriter total $50,000.With respect to these fees,the partnership must

All of the following statements are true regarding nonliquidating distributions of a partnership except: