Deck 14: Partnerships and Limited Liability Entities

Question 1

Laura is a real estate developer and owns property that is treated as inventory not a capital asset) in her business.She contributes a parcel of this land basis of $15,000) to a partnership, also to be held as inventory.The fair market value of the property is $12,000 at the contribution date.After three years, the partnership sells the land for $10,000.The partnership will recognize a $5,000 ordinary loss on sale of the property.

Answer 1

True

Question 2

Section 721 provides that no gain or loss is recognized on a contribution of property to a partnership in exchange for an interest in the partnership.An exception might apply if the taxpayer receives a cash distribution from the partnership soon after the property contribution is made.

Answer 2

True

Question 3

The partnership agreement might provide, for example, that the first $40,000 of ordinary income is allocated to Partner A.
Allocating income in this manner is an example of a separately stated item.

Answer 3

False

Question 4

In a limited liability partnership all members may participate in management and have personal liability for entity debts, except for malpractice committed by the other partners.

Question 5

The partnership reports each partner's share of income to the partner on a Form 1099-MISC.

Question 6

Section 721 provides that, in general, no gain or loss is recognized by the partnership or the partner on contribution of appreciated or depreciated property to a partnership in exchange for an interest in the partnership.

Question 7

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

Question 8

A limited partnership LP) offers all partners protection from claims by the LP's creditors.

Question 9

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.

Question 10

JLK Partnership incurred $6,000 of organizational costs and $50,000 of startup costs.JKL may deduct $5,000 each of organizational and startup costs, and the remaining costs $1,000 of organizational costs and $45,000 of startup costs) may be amortized over 60 months.

Question 11

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

Question 12

Ken and Lars formed the equal KL Partnership during the current year, with Ken contributing $100,000 in cash and Lars contributing land basis of $60,000, fair market value of $40,000) and equipment basis of $0, fair market value of $60,000).Lars recognizes a $40,000 gain on the contribution and his basis in his partnership interest is $100,000.

Question 13

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.

Question 14

In a limited liability company, all members are protected from all debts of the partnership unless they personally guaranteed the debt.

Question 15

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 and Morgan each have a basis of $100,000 in their partnership interests.

Question 16

The taxable income of a partnership flows through to the partners, who report the income on their tax returns.

Question 17

A partnership is an association formed by two or more taxpayers which may be any type of entity) to carry on a trade or business.

Question 18

The "inside basis" is defined as a partner's basis in the partnership interest.

Question 19

In a limited liability company, all members may participate in management the operating agreement cannot limit participation) and all entity debts are treated as nonrecourse liabilities for purposes of allocating the LLC's liabilities to basis.

Question 20

When Kevin and Marshall formed the equal KM LLC, the fair market values of their interests were each $100,000.Kevin contributed $60,000 cash, equipment with a basis of $0 and a fair market value of $10,000, and a small parcel of land in which he had a basis of $50,000 and which was valued at $30,000.Marshall contributed an account receivable that was valued at $100,000 and which his basis was $0.Kevin has a basis in his partnership interest of
$110,000 and Marshall's basis is $0.

Question 21

To meet the substantial economic effect tests, a partnership's allocations of income and deductions to the partners are required to be proportionate to the partners' percentage ownership of partnership capital.

Question 22

Ashley purchased her partnership interest from Lindsey on the first day of the current year for $40,000 cash.She received a $10,000 cash distribution from the partnership during the year, and her share of partnership income is
$15,000.Her share of partnership liabilities on the last day of the partnership year is $20,000.Ashley's outside basis for her partnership interest at the end of the year is $45,000.

Question 23

The BMR LLC conducted activities that were eligible for a $20,000 credit for increasing research activities.In addition, the LLC paid foreign taxes of $1,200.On the partners' Schedules K-1, BMR will allocate the $20,000 credit, and it will provide the necessary information so the partners can calculate the foreign tax credit if they so choose.

Question 24

Harry's basis in his partnership interest was $10,000 at the beginning of the tax year.For the year, his share of the partnership's loss was $8,000, and he also received a distribution of $4,000.Harry can deduct an $8,000 loss, and he recognizes a gain of $2,000 on the distribution of cash in excess of his remaining basis.

Question 25

BRW Partnership reported gross income from operations of $60,000, interest income of $3,000, rental expense of
$20,000, and a charitable contribution of $6,000.On its Schedule K, the partnership reports ordinary business income of $40,000, and separately stated interest income $3,000) and charitable contributions $6,000).

Question 26

Nicholas, a 1/3 partner, received a guaranteed payment in the current year of $50,000.Partnership income before consideration of the guaranteed payment was $20,000.Assuming no loss limitation rules apply, Nicholas reports a
$10,000 ordinary loss from partnership operations, and the $50,000 guaranteed payment as ordinary income.

Question 27

Belinda owns a 30% profit and loss interest in the BOW LLC and her basis in the interest is $30,000, excluding her share of the LLC's liabilities.Belinda guarantees a $40,000 LLC debt.Remaining liabilities not guaranteed by any of the LLC members) are $100,000.Belinda's basis in the LLC is $100,000.

Question 28

Emma's basis in her BBDE LLC interest is $60,000 at the beginning of the tax year.Her allocable share of LLC items are as follows: $20,000 of ordinary income, $2,000 tax-exempt interest income, and a $6,000 long-term capital gain.In addition, the LLC distributed $12,000 of cash to Emma during the year.Assuming the LLC had no liabilities at the beginning or the end of the year, Emma's ending basis in her LLC interest is $76,000.

Question 29

DDP Partnership reported gross income from operations of $125,000, a long-term capital gain of $5,000, a short-term capital loss of $2,000, and a charitable contribution of $5,000.On its Schedule K, the partnership reports ordinary business income of $120,000, a long-term capital gain of $5,000 and a short-term capital loss of $2,000.

Question 30

Steve's basis in his SAW Partnership interest is $200,000 at the beginning of the tax year, including all adjustments.His allocable share of partnership items are as follows: $120,000) of ordinary loss, $6,000 tax-exempt interest income, and a $14,000 long-term capital gain.In addition, the LLC distributed $20,000 of cash to Steve during the year.During the year, Steve's share of partnership debt increased by $10,000.Steve's ending basis in his LLC interest is $80,000.

Question 31

Syndication costs arise when partnership interests are being marketed to investors.These costs cannot be amortized or deducted.

Question 32

Julie and Kate form an equal partnership during the current year.Julie contributes cash of $200,000, and Kate contributes property adjusted basis of $90,000, fair market value of $260,000) subject to a nonrecourse liability of
$60,000.As a result of these transactions, Kate has a basis in her partnership interest of $120,000.

Question 33

A partnership must provide any information to the partners that the partners would need to calculate deductions not permitted at the partnership level, such as for oil and gas depletion or the corporate dividends received deduction.

Question 34

If a partnership allocates losses to the partners, the partners must first apply the passive loss limitations, then the basis limitation, and finally the at-risk limitations.If all three hurdles are met, the partner may deduct the loss.

Question 35

Items that are not required to be shown on the partners' Schedules K-1 include AMT adjustments and preferences and taxes paid to foreign countries, as AMT and the foreign tax credit are calculated by the partnership.

Question 36

William is a general partner in the WST partnership.During the current year, he receives a guaranteed payment of
$10,000 for services he provides to the partnership, and his distributive share of partnership income is $30,000.William is required to pay self-employment tax on the $10,000 guaranteed payment, but not on his distributive share of partnership income.

Question 37

Seven years ago, Paul purchased residential rental estate that he has been depreciating as MACRS property over
27.5 years.This year, when his adjusted basis in the property was $250,000, Paul transferred the property to the newly formed PLA LLC in exchange for a one-third interest in the LLC.PLA incurred $10,000 of transfer taxes and fees related to the property.PLA must treat the $260,000 basis in the property, fees, and expenses, as new MACRS property depreciable over 27.5 years.

Question 38

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.

Question 39

The amount of a partnership's income and loss from operating activities is combined with separately stated income and expenses to determine the partnership's equivalent of "taxable income." This amount is reconciled to book income on the partnership's Schedule M-1 or Schedule M-3.

Question 40

Before allocations for the current year, Marvin's basis in the MR LLC, in which Marvin is not an active member, is
$50,000.His basis includes $10,000 of debt that he guaranteed, and $20,000 of nonrecourse debt that is not qualified nonrecourse financing.Marvin has passive income from other sources of $40,000.The LLC allocates a loss of
$60,000 to Marvin.After application of the loss limitation rules, Marvin can deduct $40,000.

Question 41

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, even if it is not distributed.

Question 42

DIP LLC reports ordinary income before guaranteed payments) of $120,000, rent expense of $40,000, and interest income of $4,000 for the year.In addition, DIP paid guaranteed payments to partner Percy of $20,000.If Percy owns a 40% capital and profits interest, how much income will he report for the year and what is its character?

A)$24,000 ordinary income.
B)$24,000 ordinary income, $1,600 interest income, $20,000 guaranteed payment.
C)$25,600 ordinary income.
D)$32,000 ordinary income, $1,600 interest income.
E)$32,000 ordinary income, $1,600 interest income, $20,000 guaranteed payment.

Question 43

Gina is a single taxpayer and an active partner in the GMA LLC.Gina's Schedule K-1 reflects a $20,000 ordinary income share, $2,000 of interest income, and a $10,000 guaranteed payment for services.Gina's self-employment income from other sources and modified adjusted gross income is about $300,000.With respect to the income from the LLC, Gina is subject to the 0.9% additional Medicare tax on $30,000 and the 3.8% net investment income tax of
$2,000.

Question 44

In the current year, the POD Partnership received revenues of $200,000 and paid the following amounts: $50,000 in rent and utilities, and $20,000 as a distribution to partner Olivia.In addition, the partnership earned $6,000 of long- term capital gains during the year.Partner Donald owns a 50% interest in the partnership.How much income must Donald report for the tax year?

A)$68,000 ordinary income.
B)$78,000 ordinary income.
C)$65,000 ordinary income; $3,000 of long-term capital gains.
D)$75,000 ordinary income; $3,000 of long-term capital gains.
E)None of the above is correct.

Question 45

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 § 721a).
E)None of the above; the partnership always takes a substituted basis in the assets it receives.

Question 46

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

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)All of the above statements are always true.

Question 47

A partnership deducts all of its interest expense on Form 1065, page 1.

Question 48

Which one of the following statements regarding partnership taxation is incorrect?

A)A partnership is a tax paying 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 percent may differ from the partner's loss-sharing percent.
E)All of these statements are correct.

Question 49

When it liquidates, a partnership is not generally subject to tax on the appreciation of its assets.

Question 50

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?

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 statements are correct.

Question 51

Xena and Xavier form the XX LLC.Xena contributes cash of $20,000, land basis = $40,000; fair market value = $25,000), equipment basis = $0; fair market value = $35,000), and inventory basis = $30,000; fair market value =
$40,000).Xavier contributed $120,000 of cash.How much is the partnership's basis in the land, equipment, and inventory, and how much is Xena's basis in the partnership interest?

A)$25,000 land, $0 equipment, $30,000 inventory; $55,000 partnership interest.
B)$40,000 land, $0 equipment, $30,000 inventory; $90,000 partnership interest.
C)$25,000 land, $35,000 equipment, $30,000 inventory; $105,000 partnership interest.
D)$40,000 land, $35,000 equipment, $40,000 inventory; $135,000 partnership interest.

Question 52

TEC Partners was formed during the current tax year.It incurred $10,000 of organizational expenses, $80,000 of startup expenses, and $5,000 of transfer taxes to retitle property contributed by a partner.The property had been held as MACRS property for ten years by the contributing partner, and had an adjusted basis to the partner of $300,000 and fair market value of $400,000.Which of the following statements is correct regarding these items?

A)TEC treats the contributed property as a new MACRS asset placed in service on the date the property title is transferred.
B)TEC must amortize the $10,000 of organizational expenses over 180 months.
C)TEC's deducts the first $5,000 of startup expenses and amortizes the remainder over 180 months.
D)TEC must capitalize the transfer tax and treat it as a new asset placed in service on the date the property is contributed.
E)None of the above statements are true.

Question 53

The qualified business income deduction is calculated at the partner level.The partnership reports information the partner needs to calculate the deduction, such as W-2 wages and the unadjusted basis of the partnership's depreciable property.

Question 54

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 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)Carried interest.
C)$25,000 ordinary income.
D)$25,000 long-term capital gain.
E)$25,000 short-term capital gain.

Question 55

Which of the following entity owners cannot participate in management of the entity?

A)A general partner in a general partnership.
B)A member of a limited liability company.
C)A partner in a limited liability partnership.
D)A limited partner in a limited partnership.
E)None of the above.

Question 56

The total tax burden on entity income is greater for a partner in a partnership up to 37% for an individual partner) than on a shareholder in a corporation 21% for an individual shareholder), so partnerships are only used in special situations.

Question 57

Maria owns a 60% interest in the KLM Partnership.Four years ago her father gave her a parcel of land.The gift basis of the land to Maria is $60,000.In the current year, Maria had still not figured out how to use the land for her own personal or business use; consequently, she sold the land to the partnership for $50,000.The partnership immediately started using the land as a parking lot for its employees.Maria may recognize her $10,000 loss on the sale.

Question 58

Which one of the following statements is TRUE regarding a partner's personal liability for partnership assets?

A)LLC members can never be liable for entity debts.
B)In a limited partnership, all partners have limited liability for partnership debts.
C)In a limited liability partnership, the partner might be subject to liability for other partners' malpractice.
D)In a general partnership, all partners are liable for entity debts
E)None of the above statements are true.

Question 59

On January 1 of the current year, Anna and Jason form an equal partnership.Anna contributes $50,000 cash and a parcel of land adjusted basis of $200,000; fair market value of $150,000) in exchange for her interest in the partnership.Jason contributes property adjusted basis of $180,000; fair market value of $200,000) in exchange for his partnership interest.Which of the following statements is true concerning the income tax results of this partnership formation?

A)Jason recognizes a $20,000 gain on his property transfer.
B)Jason has a $200,000 tax basis for his partnership interest.
C)Anna has a $250,000 tax basis for her partnership interest.
D)Anna realizes and recognizes a $50,000 loss.
E)The partnership has a $150,000 adjusted basis in the land contributed by Anna.

Question 60

Which one of the following is an example of a special allocation of partnership income?

A)The partnership's capital gains and losses are shown separately on Schedule K-1.
B)Distributions from the partnership to the partner are shown on Schedule K-1 line 20.
C)The partnership agreement provides that Marcus will report all charitable contributions rather than his 20% distributive share.
D)The Schedule K-1 reports each partner's share of the information they need in order to calculate the § 199A qualified business income) deduction.
E)None of the above items are special allocations.

Question 61

Molly is a 30% partner in the MAP Partnership.During the current tax year, the partnership reported ordinary income of $200,000 before any permitted deduction for guaranteed payments and distributions to partners.The partnership made an ordinary cash distribution of $20,000 to Molly, and paid guaranteed payments to partners Molly, Amber, and Pat of $20,000 each $60,000 total guaranteed payments).How much will Molly's adjusted gross income increase as a result of the above items?

A)$36,000
B)$42,000
C)$60,000
D)$62,000
E)$80,000

Question 62

George is a limited partner in the GLH Partnership.His basis is $40,000 before considering the current year operations, and includes a $20,000 recourse debt share and a $10,000 nonrecourse debt share.The nonrecourse debt is not treated as qualified nonrecourse financing.GLH reported a $200,000 loss for the year, of which George's 40% share is $80,000.George has passive income of $50,000 from another activity not eligible for the special real estate deduction).He has no business losses for the year from other sources.How much of the $80,000 GLH loss can George deduct this year?

A)$10,000.
B)$30,000.
C)$40,000.
D)$50,000.
E)$80,000.

Question 63

AmCo and BamCo form the AB General Partnership at the start of the current year with a land contribution by BamCo and a cash contribution by AmCo.BamCo's contributed property is subject to a recourse mortgage assumed by the partnership.BamCo has an 80% interest in AB's profits and losses.The land has been held by BamCo for the past 6 years as an investment.It will be used by AB as an operating asset in its parking lot business.Which of the following statements is correct? B

A)Immediately after formation, AmCo's basis in the partnership equals the cash contributed by AmCo .
B)Immediately after formation, AmCo 's basis in the partnership equals the cash AmCo contributed plus AmCo's share of the recourse debt contributed by BamCo.
C)Because the debt is recourse, it can only be allocated to the general partners if one of them personally guarantees the debt.
D)AB's basis in the land contributed by BamCo equals BamCo's basis in the land immediately before the contribution date, less the amount of the recourse debt assumed by the partnership.
E)None of the above.

Question 64

At the beginning of the year, Ryan's capital account balance in the RUS Partnership in which Ryan owned a 40% interest) was $200,000.During the year Ryan contributed cash $40,000) and property basis = $20,000, fair market value = $30,000).RUS reported ordinary income of $100,000 and tax-exempt income of $6,000.At the end of the year, the partnership distributed $6,000 of cash to Ryan.On the Schedule K-1, the partnership shows that Ryan had a $50,000 share of nonrecourse LLC debt at the end of the year.Using the tax basis method, how much is Ryan's ending capital account balance?

A)$294,000.
B)$296,400.
C)$306,400.
D)$344,000.
E)$346,400.

Question 65

Sharon contributed property to the newly formed QRST Partnership.The property had a $100,000 adjusted basis to Sharon and a $160,000 fair market value on the contribution date.The property was also encumbered by a $90,000 nonrecourse debt, which was transferred to the partnership on that date.Sharon is treated as a general partner.She is allocated 30% of QRST's profits, and 20% of QRST's losses.Sharon's basis in the partnership interest after the formation transaction is:

A)$28,000.
B)$37,000.
C)$88,000.
D)$118,000.
E)$127,000.

Question 66

Which of the following is not a specific adjustment to the partners' basis in the partnership interest?

A)Increased by contributions the partner made to the partnership.
B)Decreased by the amount of guaranteed payments shown on the partner's Schedule K-1.
C)Increased by the partner's share of tax-exempt income.
D)Decreased by any decrease in the partner's share of partnership liabilities.
E)Increased by the partner's share of separately stated income items.

Question 67

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:

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

Question 68

Kristie is a 30% partner in the KKM Partnership.During the current year, KKM reported gross receipts of $280,000 and a charitable contribution of $30,000.The partnership paid office expenses of $80,000.In addition, KKM distributed $20,000 each to partners Kaylyn and Megan, and the partnership paid partner Kaylyn $20,000 for administrative services.Kristie reports the following income from KKM during the current tax year:

A)$54,000 ordinary income; $9,000 charitable contribution.
B)$60,000 ordinary income; $9,000 charitable contribution.
C)$36,000 ordinary income.
D)$54,000 ordinary income.
E)None of the above is correct.

Question 69

ABC LLC reported the following items on the LLC's Schedule K: ordinary income, $100,000; interest income, $3,000; long-term capital loss, $4,000); charitable contributions, $1,000; depreciation adjustment, $10,000; and cash distributions to partners, $50,000.How much will ABC show as net income loss) on its Analysis of Income Loss)?

A)$68,000
B)$78,000
C)$95,000
D)$98,000
E)$102,000

Question 70

Kristie is a 25% member in the KLM LLC.At the end of the year, KLM has accounts payable of $60,000 recourse to the LLC but not guaranteed by the LLC members), and a nonrecourse debt related to real estate of $300,000 meets the at risk limitation requirements).In addition, Kristie personally guaranteed a $50,000 liability for KLM's equipment purchases.Which one of the following shows the information that should be reported on Kristie's Schedule K-1 for the year?

A)$15,000 recourse debt, $75,000 qualified nonrecourse debt.
B)$90,000 nonrecourse debt.
C)$90,000 nonrecourse debt, $12,500 recourse debt.
D)$65,000 recourse debt, $75,000 qualified nonrecourse debt.
E)$50,000 recourse debt, $15,000 nonrecourse debt, $75,000 qualified nonrecourse debt.

Question 71

Mark and Addison formed a partnership.Mark received a 25% interest in partnership capital and profits in exchange for land with a basis of $40,000 and a fair market value of $60,000.Addison received a 75% interest in partnership capital and profits in exchange for $180,000 of cash.Three years after the contribution date, the land contributed by Mark is sold by the partnership to a third party for $76,000.How much taxable gain will Mark recognize from the sale?

A)$0
B)$9,000
C)$16,000
D)$24,000
E)$36,000

Question 72

Which one of the following is a true statement regarding the allocation of partnership debt among the partners for purposes of calculating basis?

A)No debt is allocated to LLC members because they are not liable for entity debts.
B)Nonrecourse debt is not allocated to general partners unless they personally guarantee the debt.
C)In a limited partnership, debt is only allocated to general partners.
D)In a limited liability partnership, debt is allocated among the managing partners, but not the partners with "limited liability."
E)For basis purposes, partnership debt is allocated among the partners even if no partner is personally liable for the debt.

Question 73

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, 2018 and 2019.The partnership paid guaranteed payments to Stephanie of $2,000 and $3,000 per month during the fiscal years ended September 30, 2018 and 2019.How much will Stephanie's adjusted gross income be increased by these partnership items for her tax year ended December 31, 2018?

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

Question 74

Which one of the following is not shown on the partnership's Schedule K on Page 4 of Form 1065?

A)The partnership's self-employment income.
B)The partnership's separately stated income and deductions.
C)The partnership's tax preference and adjustment items.
D)The partnership's net operating loss carryforward.
E)The partnership's investment portfolio) interest expense.

Question 75

Ryan is a 25% partner in the ROCC Partnership.At the beginning of the tax year, Ryan's basis in the partnership interest was $90,000, including his share of partnership liabilities.During the current year, ROCC reported net ordinary income of $100,000.In addition, ROCC distributed $10,000 to each of the partners $40,000 total).At the end of the year, Ryan's share of partnership liabilities increased by $10,000.Ryan's basis in the partnership interest at the end of the year is:

A)$90,000.
B)$100,000.
C)$115,000.
D)$125,000.
E)$190,000.

Question 76

On a partnership's Form 1065, which of the following statements is not true?

A)The partnership reconciles its "Income Loss) per Books" with "Income Loss) per Return" 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 taxable/deductible 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)The partnership deducts its allowable business interest expense on Form 1065, page 1, and allocates any excess to the partners for carryover.

Question 77

Binita contributed property with a basis of $40,000 and a value of $50,000 to the BE Partnership in exchange for a 20% interest in partnership capital and profits.During the first year of partnership operations, BE had net taxable income of $30,000 and tax-exempt interest income of $10,000.The partnership distributed $10,000 cash to Binita.Binita's adjusted basis outside basis) for her partnership interest at year-end is:

A)$36,000.
B)$38,000.
C)$60,000.
D)$70,000.
E)$80,000.

Question 78

At the beginning of the year, Heather's "tax basis" capital account balance in the HEP Partnership was $85,000.During the tax year, Heather contributed property with a basis of $6,000 and a fair market value of $10,000.Her share of the partnership's ordinary income and separately stated income and deduction items was $40,000.At the end of the year, the partnership distributed $15,000 of cash to Heather.In addition, the partnership allocated $12,000 of recourse debt and $10,000 of nonrecourse debt to Heather.What is Heather's ending capital account balance determined using the "tax basis" method?

A)$116,000
B)$120,000
C)$126,000
D)$128,000
E)$138,000

Question 79

Allison is a 40% partner in the BAM Partnership.At the beginning of the tax year, Allison's basis in the partnership interest was $100,000, including her share of partnership liabilities.During the current year, BAM reported an ordinary loss of $60,000 before the following payments to the partners).In addition, BAM made an ordinary distribution of $8,000 to Allison and paid partner Brian a $20,000 consulting fee.At the end of the year, Allison's share of partnership liabilities decreased by $10,000.Assuming loss limitation rules do not apply, Allison's basis in the partnership interest at the end of the year is:

A)$2,000.
B)$50,000.
C)$58,000.
D)$70,000.
E)None of the above is correct.

Question 80

Brooke and John formed a partnership.Brooke received a 40% interest in partnership capital and profits in exchange for contributing land basis of $30,000 and fair market value of $120,000).John received a 60% interest in partnership capital and profits in exchange for contributing $180,000 of cash.Three years after the contribution date, the land contributed by Brooke is sold by the partnership to a third party for $150,000.How much taxable gain will Brooke recognize from the sale?

A)$102,000
B)$90,000
C)$48,000
D)$36,000
E)$0