Solved by verified expert :1075.
CHAPTER 10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest41
Which of the following partnership owners is
personally liable for the entity’s debts to general creditors?
a.
A partner in a limited liability partnership.
b. A member of a limited liability
company.
c. A limited partner in a limited partnership.
d. A general partner in a limited
partnership.
e. None of these owners are personally
liable for entity debts.
1076. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest42
Which one of the following statements regarding partnership taxation is incorrect?
a.
A partnership is not a taxable entity for Federal income tax purposes.
b. Partnership income is comprised of
ordinary partnership income or loss and separately stated items.
c. A partnership is required to file a
return with the IRS.
d. A partner’s profit-sharing ratio
equals the partner’s loss-sharing ratio.
e. All of these statements are correct.
1077. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest43
On a partnership’s Form 1065, which of the following statements is not true?
a.
The partnership reconciles its net income (including separately stated items)
to book income on Schedule M-1 or M-3.
b. The partnership balance sheet on
Schedule L is generally presented on a financial (book) basis.
c. All partnership income and expense
items are reported on Form 1065, page 1.
d. The partnership’s equivalent of
taxable income is reported in the “Analysis of Income (Loss).”
e. All of the above statements are true.
1078. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest44
Which of the following is a correct
definition of a concept related to partnership taxation?
a.
The entity concept treats partners and partnerships as separate units and gives
the partnership its own tax “personality.”
b. A partner’s capital sharing ratio is
defined as the percent of partnership profits that will be allocated to the
partner.
c. The partnership’s inside basis is
defined as the sum of each partner’s capital account balance.
d. A special allocation is defined as an
amount that could differently affect the tax liabilities of two or more
partners.
e. None of these statements is correct.
1079. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest45
A partnership will take a carryover basis in an asset it acquires when:
a.
The partnership acquires the asset through a § 1031 like-kind exchange.
b. A partner owning 25% of partnership
capital and profits sells the asset to the partnership.
c. The partnership leases the asset from
a partner on a one-year lease.
d. The partnership acquires the asset
from a partner as a contribution to partnership capital under § 721(a).
e. None of the above.
1080. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest46
On January 1 of the current year, Jenna and Rob form an equal partnership.
Jenna makes a cash contribution of $80,000 and a property contribution
(adjusted basis of $120,000; fair market value of $160,000) in exchange for her
interest in the partnership. Rob contributes property (adjusted basis of
$190,000; fair market value of $240,000) in exchange for his partnership
interest. Which of the following statements is true concerning the income tax
results of this partnership formation?
a.
Jenna has a $200,000 tax basis for her partnership interest.
b. Rob recognizes a $50,000 gain on his
property transfer.
c. Rob has a $240,000 tax basis for his
partnership interest.
d. The partnership has a $160,000
adjusted basis in the property contributed by Jenna.
e. None of the statements is true.
1081. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest47
Kevin, Cody, and Greg contributed assets to form the equal KCG Partnership.
Kevin contributed cash of $50,000 and land with a basis of $80,000 (fair market
value of $50,000). Cody contributed cash of $30,000 and land with a basis of
$40,000 (fair market value of $70,000). Greg 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?
a.
Kevin’s basis in his partnership interest is $130,000.
b. Cody’s basis in his partnership
interest is $100,000.
c. Greg’s basis in his partnership
interest is $60,000.
d. KCG has a basis of $80,000, $40,000,
and $0 in the land and property (excluding cash) contributed by Kevin, Cody,
and Greg, respectively.
e. All of these statement are correct.
1082. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest48
Tara and Robert formed the TR Partnership four years ago. Because they decided
the company needed some expertise in multimedia presentations, they offered
Katie a 1/3 interest in partnership capital and profits if she would come to
work for the partnership. On July 1 of the current year, the unrestricted
partnership interest (fair market value of $25,000) was transferred to Katie. How
should Katie treat the receipt of the partnership interest in the current year?
a.
Nontaxable.
b. $25,000 ordinary income.
c. $25,000 short-term capital gain.
d. $25,000 long-term capital gain.
e. None of the above.
1083. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest49
Partner Tom transferred property (basis of $20,000; fair market value of
$50,000) to the TUV Partnership in exchange for a partnership interest. At a
later date, when Tom’s outside basis for his partnership interest was $70,000,
Tom received a $50,000 cash distribution from the partnership. Which one of the
following statements is not true?
a.
If the cash distribution occurred two months after the property contribution,
the IRS may treat the transaction as a disguised sale.
b. If the transaction is treated as a
disguised sale, Tom’s basis in the partnership interest will be $20,000.
c. If Tom would have made the property
contribution anyway, even if he knew that the partnership would probably not
have any cash to distribute to him, the IRS would not likely contend the
transaction was a disguised sale.
d. If the IRS treated the transaction as
a disguised sale, the partnership’s basis in the property would be $50,000.
1084. CHAPTER
10—PARTNERSHIPS: FORMATION, OPERATION, AND BASIS Quest50
In which of the following independent situations would the transaction most
likely be characterized as a disguised sale?
a.
Partner George contributes appreciated property to the GMVV Partnership, and
three years later GMVV distributes $100,000 proportionately to all the
partners.
b. Brianna contributes property with a
basis of $20,000 and a fair market value of $50,000 to the BGB Partnership in
exchange for a 20% interest therein. The partnership agrees to distribute
$20,000 to Brianna in fifteen months, if partnership cash flows from operations
exceed $100,000 at that time. The partnership does not expect to produce
operating cash flows of over $100,000 for at least five years.
c. Luis contributes appreciated property
to the BLP Partnership. Thirty months later, he receives a distribution from
the partnership of $15,000 cash. None of the other partners received a
distribution. There was no agreement that BLP would make the distribution, and
Luis would have made the contribution whether or not the partnership made the
distribution.
d. None of the above transactions will
be treated as a disguised sale.
e. a., b., and c. are all treated as
disguised sales.
