Solved by verified expert :1035. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Questio
In a limited partnership, all partners are protected from debts of the
partnership.
a.
True
b. False
1036. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest 2
A limited liability company offers all “members” protection from claims by the
LLC’s creditors.
a.
True
b. False
1037. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest 3
A limited liability limited partnership (LLLP) is a limited partnership (LP) in
which all partners, including the general partners, are protected from debts of
the partnership.
a.
True
b. False
1038. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest 4
The governing document of a limited liability company (LLC) is a partnership
agreement which should spell out the partners’ rights and obligations.
a.
True
b. False
1039. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest 5
The taxable income of a partnership flows through to the partners, who report
the income on their tax returns.
a.
True
b. False
1040. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest 6
The partnership reports each partner’s share of income to the partner in a
single amount on Form 1099.
a.
True
b. False
1041. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest 7
On Form 1065, partners’ capital accounts should be determined using the same
method on Schedule L, Schedule M-2, and the Schedules K-1 prepared for the
partners.
a.
True
b. False
1042. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest 8
The amount of a partnership’s income and loss from operating activities is
combined with separately stated income and expenses in determining the
partnership’s net income (loss). This amount is reconciled to book income on
the partnership’s Schedule M-1 or Schedule M-3.
a.
True
b. False
1043. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest 9
An example of the “entity concept” underlying partnership taxation is the fact
that the partners (rather than the partnership) pay tax on partnership income.
a.
True
b. False
1044. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest10
A partner has a profit-sharing percent, a loss-sharing percent, and a
capital-sharing ownership percent. Depending on the provisions in the
partnership agreement, these amounts may or may not be the same for a given
partner.
a.
True
b. False
1045. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest11
The “outside basis” is defined as a partner’s basis in the partnership
interest.
a.
True
b. False
1046. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest12
Section 721 provides that no gain or loss is recognized on contribution of
property to a partnership in exchange for an interest in the partnership. A
disguised sale is an exception to nonrecognition of gain or loss under § 721.
a.
True
b. False
1047. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest13
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’s tax basis in her interest is $42,000;
Morgan’s tax basis is $78,000.
a.
True
b. False
1048. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest14
Tyler and Travis formed the equal T&T Partnership during the current year,
with Tyler contributing $300,000 in cash and Travis contributing land (basis of
$120,000, fair market value of $160,000) and inventory (basis of $30,000, fair
market value of $140,000). Travis recognizes no gain or loss on the
contribution and his basis in his partnership interest is $150,000.
a.
True
b. False
1049. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest15
Justin and Kevin formed the equal JK Partnership during the current year, with
Justin contributing $60,000 in cash and Kevin contributing land (basis of
$40,000, fair market value of $30,000) and equipment (basis of $0, fair market
value of $30,000). Kevin recognizes a $20,000 gain on the contribution and his
basis in his partnership interest is $60,000.
a.
True
b. False
1050. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest16
Julie owns property that is treated as a capital asset in her hands. She contributed
a parcel of land (basis $60,000; fair market value $58,000) to a real estate
partnership, which will hold it as inventory. After three years, the
partnership sells the land for $56,000. The partnership will recognize a $4,000
ordinary loss on sale of the property.
a.
True
b. False
1051. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest17
If the partnership properly makes an election for treatment of a specific tax
item, the partner is bound by that treatment.
a.
True
b. False
1052. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest18
JLK Partnership incurred $15,000 of organizational costs and $75,000 of startup
costs in 2011. JKL may deduct $5,000 each of organizational and startup costs,
and the remaining costs ($10,000 of organizational costs and $70,000 of startup
costs) may be amortized over 180 months.
a.
True
b. False
1053. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest19
The MNO Partnership, a calendar year taxpayer, was formed on July 1 of the
current year and started business on October 1. MNO incurred $30,000 in startup
costs. MNO may deduct $5,000 and amortize the remaining $25,000 over 120 months
starting in July.
a.
True
b. False
1054. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest20
Syndication costs arise when partnership interests are being marketed to
investors. These costs are amortized over 180 months.
a.
True
b. False
