Question 1

Match each of the following statements with the terms below that provide the best definition.
-Schedules M-1 or M-3

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) Computation that determines the way recourse debt is shared.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) N) and P)
R) H) and J)

Question 2

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.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Cassandra is a 10% limited partner in C&C, Ltd. Her basis in the interest is $60,000 before loss allocations, including her $30,000 share of the partnership's nonrecourse debt. (This debt is not qualified nonrecourse financing.) Cassandra is also a 10% limited partner in MNOP, in which her basis is $30,000. Cassandra is allocated an $80,000 loss from C&C, and $20,000 of income from MNOP. How much of the loss from C&C may Cassandra deduct? Under what Code provisions are the remaining losses suspended?

Accepted Answer

Cassandra's $80,000 loss from C&C is fir...

Question 5

Match each of the following statements with the terms below that provide the best definition.
-Required taxable year

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) Computation that determines the way recourse debt is shared.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) F) and O)
R) E) and M)

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Stephanie is a calendar year cash basis taxpayer. She owns a 50% profit and loss interest in a cash basis partnership with a September 30 year-end. The partnership's operating income (after deducting guaranteed payments)  was $120,000 ($10,000 per month)  and $144,000 ($12,000 per month) , respectively, for the partnership tax years ended September 30, 2015 and 2016. The partnership paid guaranteed payments to Stephanie of $2,000 and $3,000 per month during the fiscal years ended September 30, 2015 and 2016. How much will Stephanie's adjusted gross income be increased by these partnership items for her tax year ended December 31, 2015?

Accepted Answer

A)  $60,000
B)  $72,000
C)  $84,000
D)  $90,000
E)  $108,000F) A) and D)
G) A) and E)

Question 8

What is the difference between a partner's basis in the partnership interest and a partner's § 704(b) book capital account? What are the purposes of these two amounts? Why are these amounts typically different?

Accepted Answer

The partner's capital account balance is...

Question 9

Tim, Al, and Pat contributed assets to form the equal TAP Partnership. Tim contributed cash of $40,000 and land with a basis of $80,000 (fair market value of $60,000) . Al contributed cash of $60,000 and land with a basis of $50,000 (fair market value of $40,000) . Pat contributed cash of $60,000 and a fully depreciated property ($0 basis)  valued at $40,000. Which of the following tax treatments is not correct?

Accepted Answer

A)  Tim's basis in his partnership interest is $120,000.
B)  Al realizes and recognizes a loss of $10,000.
C)  Pat realizes a gain of $40,000 but recognizes $0 gain.
D)  TAP has a basis of $80,000, $50,000, and $0 in the land and property (excluding cash)  contributed by Tim, Al, and Pat, respectively.
E)  All of these statement are correct.F) B) and E)
G) None of the above

Question 10

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) Computation that determines the way recourse debt is shared.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) N) and O)
R) C) and O)

Question 11

A partner will have the same profit-sharing, loss-sharing, and capital-sharing ownership percentages.

Accepted Answer

A) True 
 B)False

Question 12

Match each of the following statements with the terms below that provide the best definition.
-Economic effect test

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) Computation that determines the way recourse debt is shared.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) B) and O)
R) A) and N)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Blaine contributes property valued at $50,000 (basis of $40,000) in exchange for a 25% interest in the BIKE Partnership. If the property is later sold for $70,000, gain of $15,000 will be allocated to Blaine.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)  Calculation of a § 199 deduction amount.
B)  Whether to capitalize, amortize, or expense research and experimental costs.
C)  The partnership's overall accounting method.
D)  Whether to claim a § 179 deduction related to property acquired by the partnership.
E)  All of the above elections are made by the partnership.F) A) and E)
G) All of the above

Question 17

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.

Accepted Answer

A) True 
 B)False

Question 18

Match each of the following statements with the terms below that provide the best definition.
-Outside 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) Computation that determines the way recourse debt is shared.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) J) and K)
R) N) and O)

Question 19

Misty and John formed the MJ Partnership. Misty contributed $50,000 of cash in exchange for her 50% interest in the partnership capital and profits. During the first year of partnership operations, the following events occurred: the partnership had a net taxable income of $20,000; Misty received a distribution of $12,000 cash from the partnership; and Misty had a 50% share in the partnership's $60,000 of recourse liabilities on the last day of the partnership year. Misty's adjusted basis for her partnership interest at year end is:

Accepted Answer

A)  $48,000.
B)  $60,000.
C)  $78,000.
D)  $88,000.
E)  $90,000.F) C) and D)
G) A) and E)

Question 20

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

Accepted Answer

A)  Depreciable property: the partnership treats the property as newly acquired depreciable property, and may claim a § 179 deduction.
B)  Unrealized (cash-basis)  receivables: the partnership will report a capital gain when the receivable is collected.
C)  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.
D)  Land valued at less than its basis: the partnership reports a § 1231 loss if the property is sold at a loss.
E)  None of these statements is correct.F) B) and D)
G) A) and B)

Exam 14: Partnerships and Limited Liability Entities

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

Correct Answer
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Match each of the following statements with the terms below that provide the best definition. -Schedules M-1 or M-3

Correct Answer
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A partner will have the same profit-sharing, loss-sharing, and capital-sharing ownership percentages.

Correct Answer
verified

Correct Answer
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What is the difference between a partner's basis in the partnership interest and a partner's § 704(b) book capital account? What are the purposes of these two amounts? Why are these amounts typically different?

Correct Answer
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The partner's capital account balance is...
View Answer

Match each of the following statements with the terms below that provide the best definition. -Economic effect test

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

Correct Answer
verified

Match each of the following statements with the terms below that provide the best definition. -Required taxable year

Correct Answer
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One of the disadvantages of the partnership form is that the partner's share of the partnership's taxable income is taxed to the partner, regardless of whether or not distributed.

Correct Answer
verified

Correct Answer
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Cassandra's $80,000 loss from C&C is fir...
View Answer

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

Correct Answer
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The JPM Partnership is a US-based manufacturing company. JPM calculates the domestic production activities deduction (§ 199) and deducts that amount on its Form 1065.

Correct Answer
verified

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. -Foreign tax credit vs. deduction

Correct Answer
verified

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

Correct Answer
verified

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.

Correct Answer
verified

Blaine contributes property valued at $50,000 (basis of $40,000) in exchange for a 25% interest in the BIKE Partnership. If the property is later sold for $70,000, gain of $15,000 will be allocated to Blaine.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Exam 14: Partnerships and Limited Liability Entities

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

Correct AnswerverifiedShow Answer

Match each of the following statements with the terms below that provide the best definition. -Schedules M-1 or M-3

Correct AnswerverifiedShow Answer

A partner will have the same profit-sharing, loss-sharing, and capital-sharing ownership percentages.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is the difference between a partner's basis in the partnership interest and a partner's § 704(b) book capital account? What are the purposes of these two amounts? Why are these amounts typically different?

Correct AnswerverifiedThe partner's capital account balance is...View AnswerShow Answer

Match each of the following statements with the terms below that provide the best definition. -Economic effect test

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Match each of the following statements with the terms below that provide the best definition. -Required taxable year

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedCassandra's $80,000 loss from C&C is fir...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Blaine contributes property valued at $50,000 (basis of $40,000) in exchange for a 25% interest in the BIKE Partnership. If the property is later sold for $70,000, gain of $15,000 will be allocated to Blaine.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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The partner's capital account balance is...
View Answer

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Correct Answer
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Correct Answer
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Cassandra's $80,000 loss from C&C is fir...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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