Question 1

This year, Reggie's distributive share from Almonte Partnership includes $8,000 of interest income, $4,000 of dividend income, and $60,000of ordinary business income.
A. Assume that Reggie materially participates in the partnership. How much of his distributive share from Almonte Partnership is potentially subject to the net investment income tax?
B. Assume that Reggie does not materially participate in the partnership. How much of his distributive share from Almonte Partnership is potentially subject to the net investment income tax?

Accepted Answer

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Question 2

Explain why partners must increase their tax basis for their share of partnership taxable and nontaxable income or gain and reduce their basis by their share of partnership deductible and nondeductible expenses or losses.

Accepted Answer

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Question 3

Lloyd and Harry, equal partners, form the Ant World Partnership. During the year, Ant World had the following revenue, expenses, gains, losses, and distributions:
  Given these items, what amount of ordinary business income (loss) and what separately stated items should be allocated to each partner for the year?

Accepted Answer

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Question 4

Ruby's tax basis in her partnership interest at the beginning of the partnership's tax year was $13,000. The following items were included in her Schedule K-1 from the partnership for the year:
  Determine what amounts related to these items Ruby will report on her tax return assuming her tax basis and at-risk amount are equal and that she is a material participant in the partnership's activities. Further, assume that Ruby and her husband, Gerald, are not involved in any other trade or business and that they file a joint return every year.

Accepted Answer

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Question 5

Ruby's tax basis in her partnership interest at the beginning of the partnership's tax year was $13,000. The following items were included in her Schedule K-1 from the partnership for the year:
  Determine what amounts related to these items Ruby will report on her tax return assuming her tax basis and at-risk amount are equal and that she is a material participant in the partnership's activities. Further, assume that Ruby and her husband, Gerald, are not involved in any other trade or business and that they file a joint return every year.

Accepted Answer

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Question 6

At the end of Year 1, Tony had a tax basis of $40,000 in Tall Ladders, Limited Partnership. Tony has a 20 percent profits interest in Tall Ladders. For Year 2, Tall Ladders will pay Tony a $10,000 guaranteed payment for extra services he provides to the partnership. Given the following income statement and balance sheet from Tall Ladders, what is Tony's adjusted tax basis at the end of Year 2?

Accepted Answer

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Question 7

Greg, a 40percent partner in GSS Partnership, contributed land to the partnership in exchange for his partnership interest when the partnership was formed. At the time, his basis in the land was $30,000 and its FMV was $133,000. Three years after the partnership was formed, GSS Partnership decided to sell the land to an unrelated party for $150,000. When the land is sold, how much of the gain should be allocated to each partner of GSS Partnership if Sam and Steve are each 30percent partners?

Accepted Answer

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Question 8

What is the difference between a partner's tax basis and at-risk amount?

Accepted Answer

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Question 9

Bob is a general partner in Fresh Foods Partnership and is trying to determine if the income reported on his K-1 should be classified as passive or active trade or business income. List three different criteria that, if met, would allow Bob to treat the income from Fresh Foods as active trade or business income.

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Question 10

Why are guaranteed payments deducted in calculating the ordinary business income (loss) of partnerships and treated as a separately stated item for the partners that receive the payment?

Accepted Answer

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Question 11

Ruby's tax basis in her partnership interest at the beginning of the partnership's tax year was $13,800. The following items were included in her Schedule K-1 from the partnership for the year:
  Determine what amounts related to these items Ruby will report on her tax return assuming her tax basis and at-risk amount are equal and that she is a material participant in the partnership's activities. Further, assume that Ruby and her husband, Gerald, are not involved in any other trade or business and that they file a joint return every year.

Accepted Answer

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Question 12

Fred has a 45percent profits interest and 30percent capital interest in the SAP Partnership, and his tax basis before considering his share of SAP's current-year loss is $11,000. Included in his tax basis is a $2,600 share of recourse debt and a $5,300 share of nonrecourse debt. Fred is a limited partner in SAP. He is not involved in any other activities. If SAP has a $15,000 ordinary loss for the year, how much of the loss can be deducted currently, and how much of the loss is suspended because of the tax basis, at-risk, and passive activity loss limitations?

Accepted Answer

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Question 13

What general accounting methods may be used by a partnership, and how and by whom are they selected?

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Question 14

Lloyd and Harry, equal partners, form the Ant World Partnership. During the year, Ant World had the following revenue, expenses, gains, losses, and distributions:
  Given these items, what amount of ordinary business income (loss) and what separately stated items should be allocated to each partner for the year?

Accepted Answer

The answer of Lloyd and Harry, equal partners, form the...

Quiz 9: Forming and Operating Partnerships

Explain why partners must increase their tax basis for their share of partnership taxable and nontaxable income or gain and reduce their basis by their share of partnership deductible and nondeductible expenses or losses.

What is the difference between a partner's tax basis and at-risk amount?

Why are guaranteed payments deducted in calculating the ordinary business income (loss) of partnerships and treated as a separately stated item for the partners that receive the payment?

What general accounting methods may be used by a partnership, and how and by whom are they selected?