Question 1

Callie contributes the following assets to a partnership in exchange for a 30% partnership interest:  What is Callie's beginning basis in her partnership interest?

Accepted Answer

The answer of Callie contributes the following assets to a...

Question 2

Bryan,Shahin,and Michele form a partnership.Bryan and Shahin contribute inventory and a building,respectively.Michele agrees to perform all of the accounting and office work in exchange for a 10% interest.  a.Do any of the partners recognize any gain? If so,how much and why?
b.What is each partner's basis in his or her partnership interest?
c.What is the basis to the partnership of each asset?

Accepted Answer

The answer of Bryan,Shahin,and Michele form a partnership.Bryan and Shahin...

Question 3

On April 30 of the current year,Ashley contributes a building with a $155,000 basis and a $235,000 FMV in exchange for a partnership interest.She purchased the building eight years ago.
a.What is Ashley's basis in her partnership interest?
b.What is Ashley's holding period of her partnership interest?
c.What is the basis of the building in the hands of the partnership?
d.What is the holding period of the building in the hands of the partnership?
e.How will the partnership depreciate the building in the year of contribution?

Accepted Answer

The answer of On April 30 of the current year,Ashley...

Question 4

Jeremy and Juan are equal partners in the JJ Partnership.Jeremy receives a guaranteed payment of $120,000.In addition to the guaranteed payment,Jeremy withdraws $30,000 from the partnership.The partnership has $78,000 in ordinary income during the year.
a.How much income must Jeremy report from JJ partnership?
b.What is the effect on Jeremy's partnership basis?

Accepted Answer

The answer of Jeremy and Juan are equal partners in...

Question 5

Jose purchased a 30% partnership interest for $38,000 in June 2011.Jose's share of partnership income was $8,000 in 2011,$12,000 in 2012,$28,000 in 2013,and $6,000 in 2014.Jose made no additional contributions to,or withdrawals from,the partnership.On December 29,2014,Jose sold his partnership interest for $108,000.What is Jose's gain or loss on the sale of his partnership interest?

Accepted Answer

The answer of Jose purchased a 30% partnership interest for...

Question 6

Marty and Blake are equal partners in MB Partnership.The partnership reports the following items of income and expense:  a.Which items are considered separately stated items? How will these items be reported to the partners? What form will be used?
b.Where (on what forms)will these amounts be reported by the partners?

Accepted Answer

The answer of Marty and Blake are equal partners in...

Question 7

Anna has a $25,000 basis in her partnership interest when she receives liquidating distributions from the partnership.Anna receives cash of $18,000 and computer equipment with a basis to the partnership of $15,000.What are the tax consequences of the liquidating distributions to Anna?

Accepted Answer

The answer of Anna has a $25,000 basis in her...

Question 8

Charley is a partner in Charley,Austin,Liz & Bass Partnership.Charley owned 25% from January 1,2014 to April 1,2014 when he bought both Liz's 25% and Bass's 25% interests.He owned 75% for the rest of the year.The partnership had ordinary income of $358,000 and $12,000 in long-term capital gains.Barring any special allocations in a partnership agreement,what is Charley's share of income (assume a 365-day year)?

Accepted Answer

The answer of Charley is a partner in Charley,Austin,Liz &...

Question 9

Latesha contributes a building with a FMV of $125,000 and a basis of $115,000 to a partnership on January 4,2011.On December 15,2014,the partnership distributed the building to Katie,a partner in the same partnership.At distribution,the building had a FMV of $129,000.
a.What is the effect of the distribution on Latesha,if any?
b.What is the effect of the distribution to Katie?

Accepted Answer

The answer of Latesha contributes a building with a FMV...

Question 10

Molly has a $15,000 basis in her partnership interest when she receives a liquidating distribution from the partnership.Molly receives cash of $6,000.What is Molly's recognized gain or loss on the liquidating distribution?

Accepted Answer

Molly's recognized gain or loss on the liquidating distribution can be calculated as follows:
$6,000 (cash received) - $15,000 (basis in partnership interest) = $(9,000) loss. This loss is recognized for tax purposes and can be deducted on Molly's tax return.

Question 11

Doug,Geoffrey,and Fredrick form a partnership and contribute the following assets:  Geoffrey's building has a mortgage of $135,000 which the partnership assumes.
a.Do any of the partners recognize any gain? If so,how much and why?
b.What is each partner's basis in his or her partnership interest?
c.What is the basis to the partnership in each asset?
d.What are the holding periods to the partnership for each asset?
e.How would your answer change with respect to Geoffrey if his basis in the building was $85,000?

Accepted Answer

The answer of Doug,Geoffrey,and Fredrick form a partnership and contribute...

Question 12

Rita has a beginning basis in a partnership of $43,000.Rita's share of income and expense from the partnership consists of the following amounts:  a.What items are separately stated?
b.What is Rita's self-employment income?
c.Calculate Rita's partnership basis at the end of the year.

Accepted Answer

The answer of Rita has a beginning basis in a...

Question 13

When dealing with the liquidation of a partnership interest,a partner will:

Accepted Answer

A partner will recognize a loss during the liquidation of a partnership interest only when the distribution consists of money, inventory, and/or receivables, as these are considered less favorable assets compared to others like property or capital assets.

Question 14

Cameron has a basis in his partnership interest of $5,000.Cameron's share of partnership income is $5,000.He also receives a cash distribution from the partnership of $13,000.What is his gain or loss as a result of the distribution?

Accepted Answer

To determine Cameron's gain or loss, we need to calculate his ending basis in the partnership.

Starting Basis = $5,000 
Share of Partnership Income = +$5,000 
Cash Distribution = -$13,000

Ending Basis = $5,000 + $5,000 - $13,000 = -$3,000

Since Cameron's ending basis is negative, he has a loss of $3,000.

Question 15

Calvin purchased a 30% partnership interest for $53,000 in March 2012.Calvin's share of partnership income was $5,000 in 2012,$25,000 in 2013,and $(9,000)in 2014.Calvin made no additional contributions to,or withdrawals from,the partnership.On December 1,2014,Calvin sold his partnership interest for $83,000.What is Calvin's gain or loss on the disposal?

Accepted Answer

Calvin's basis in his partnership interest is $53,000. He sold his interest for $83,000, so he has a gain of $30,000. However, he is only taxed on his share of the partnership's income, which was $5,000 in 2012, $25,000 in 2013, and $(9,000) in 2014. His total share of partnership income is $21,000. This means that his taxable gain is $30,000 - $21,000 = $9,000.

Quiz 14: Partnership Taxation

Callie contributes the following assets to a partnership in exchange for a 30% partnership interest: What is Callie's beginning basis in her partnership interest?

Anna has a $25,000 basis in her partnership interest when she receives liquidating distributions from the partnership.Anna receives cash of $18,000 and computer equipment with a basis to the partnership of $15,000.What are the tax consequences of the liquidating distributions to Anna?

Molly has a $15,000 basis in her partnership interest when she receives a liquidating distribution from the partnership.Molly receives cash of $6,000.What is Molly's recognized gain or loss on the liquidating distribution?

Rita has a beginning basis in a partnership of $43,000.Rita's share of income and expense from the partnership consists of the following amounts: a.What items are separately stated? b.What is Rita's self-employment income? c.Calculate Rita's partnership basis at the end of the year.

When dealing with the liquidation of a partnership interest,a partner will:

Cameron has a basis in his partnership interest of $5,000.Cameron's share of partnership income is $5,000.He also receives a cash distribution from the partnership of $13,000.What is his gain or loss as a result of the distribution?