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Exam 17: Partnerships and S Corporations

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Question 21

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A business distributes land to one of its owners.The business purchased the land a few years ago for $15,000,but it is now worth $35,000.Compare the treatment of this distribution when made by a partnership as opposed to an S corporation.Consider the impact on the business and the partner/shareholder and the determination of basis in the property.

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A partnership normally distributes non-c...

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Question 22

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The basis of a partner's interest in a partnership is adjusted to reflect each partner's share of income and deduction items only if a distribution is made to the partners.

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B) False

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Question 23

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On July 1,Joseph,a 10% owner,sells his interest in ABC Partnership to Andy,an outsider,for $165,000 cash and the release from $20,000 of partnership liabilities.Joseph's partnership interest at the beginning of the year was $120,000.The partnership earned income through June 30 of $100,000.Joseph's share of partnership liabilities increased by $5,000 from January 1 to June 30.What are the tax consequences to Joseph on the sale of his partnership interest (assume the partnership does not hold any inventory or unrealized receivables) ?

Emma contributes property having a $24,000 FMV and a $15,000 adjusted basis and also renders legal services valued at $22,000 in exchange for a 30% interest in the capital and profits of the ABC partnership.The tax results to Emma will be

Clark and Lois formed an equal partnership three years ago.Clark contributed cash of $160,000 while Lois contributed land with a $90,000 adjusted basis and a $160,000 FMV.Three years later the land is sold for $210,000.The tax results to Clark and Lois are

Under the "check-the-box" Treasury Regulations,an LLC with more than one member is treated as a partnership unless the LLC affirmatively elects to be classified as a corporation.

Chen contributes a building worth $160,000 (adjusted basis $180,000) and $40,000 in services to a partnership for a partnership interest.Chen's basis in the partnership interest is

If a partner contributes inventory to the partnership in exchange for a partnership interest,the holding period for the partnership interest begins on the date the inventory was acquired by the transferor partner.

At the beginning of this year,Edmond and Samuel were equal partners in a partnership that uses the calendar year as its tax year.On October 1,this year,Joan contributed $48,000 cash for a one-third interest in the partnership.The interests of both Edmond and Samuel drop to one-third.The partnership reports a $36,000 ordinary loss for the current tax year ending December 31.The loss allocation to Samuel (one of the original partners) is

Although a partner's distributive share of income,deductions,losses,and credits is generally determined by partnership agreement,special allocation provisions restrict the partners' freedom to shift some tax benefits among partners.

An LLC that elects to be taxed like a partnership is also classified as a partnership for legal purposes.

The basis of a partnership interest is equal to the sum of money contributed plus the FMV of the property transferred to the partnership.

Scott provides accounting services worth $40,000 to the ABC Partnership in exchange for a 20% interest in the capital and profits of the partnership.The tax result to Scott is

Which of the following characteristics can disqualify a corporation from S Corporation status?

All the following are types of pass-through entities except

What is the primary purpose of Form 1065,Partnership Tax Return?

Hunter contributes property having a $75,000 FMV and a $65,000 adjusted basis which is subject to a $36,000 mortgage in exchange for a one-fourth interest in the ABC Partnership.The partnership owes no other debts,but does assume this mortgage.Profits and losses are shared equally and each partner has a one-fourth interest in partnership capital.Hunter's basis in the partnership is

An S corporation distributes land with a basis of $60,000 and a FMV of $90,000 to its shareholders.The tax results of the distribution will be

Stephanie owns a 25% interest in a qualifying S corporation.Stephanie's basis in the stock was $40,000 at the beginning of the year.Stephanie made no capital contributions and received no distributions during the year.Stephanie loaned the S corporation $10,000 this year.The S corporation incurred a $240,000 ordinary loss this year.Stephanie's deduction and carryover of the unused loss are

Joey and Bob each have 50% interest in a Partnership.Both Joey and the partnership file returns on a calendar year basis.Partnership Q had a $12,000 loss in 2013.Joey's adjusted basis in his partnership interest on January 1,2013 was $5,000.In 2014,the partnership had a profit of $10,000.Assuming there were no other adjustments to Joey's basis in the partnership,what amount of partnership income (loss) should Joey show on his 2013 and 2014 individual income tax returns?