Advanced tax Accounting questions

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1) Yong contributes a machine having an adjusted basis of $20000 and a FMV of $25000 for a 10% partnership interest. Yong had taken $10000 of depreciation prior to the contribution. The partnership has no liabilities. As a result of the contribution, Yong must recognize:
A) No gain or loss
B) A $5000 sec. 1245 gain
C) A $5000 capital gain
D) $10,000 ordinary income

2) Identify which of the following statements is true.
a) The contribution of Sec. 1245 property to a partnership triggers a recognition of ordinary income by the contributor at the time of the transfer.
b) A partner may not recognized ordinary income when receiving a capital and profits interest in a partnership in exchange for services.
c) When a partnership interest is given to a partner in exchange for services , the partnership can deduct or capitalize the FMV of the services, depending on the nature of the services.
d) All of the above are false.

3) Identify which of the following statements is true.
A contribution of services for a partnership interest is a tax-free transaction
For federal income tax purposes, formation of a partnership is governed by Sec. 721.
When a partnership assumes a liability on property contributed by a partner, the only effect on the contributing partner’s basis in his or her partnership interest is that his or her basis will be increased by the amount of the liability assumed by the other partners

d) All the above are false.

4) When determining the guaranteed payment, which of the following is correct?
A) If the distributed share is less that the guaranteed minimum amount, the guaranteed payment is equal to the difference between the distributive share and the guaranteed minimum amount.
B) If the distributive share is greater than the guaranteed minimum amount, the guaranteed payment is equal to the difference between the distributive share and the guaranteed payment amount.
C) Guaranteed payments are payments determined with regard to partnership income.
D) The distinction between guaranteed payments and the distributive share is clear in practice.

5) Identify which of the following statements is true.
A) A partner’s relief of debt is treated as if the partner receives a cash distribution.
B) When a partnership assumes any liabilities of the transferor, the transferor has an increase in the basis of his or her partnership interest.
C) Gain recognized by a contributing partner because of the assumptions of liabilities by the partnership increases the partnership basis in the contributed property.
D) All of the above are false.

6) Jane contributes land with a FMV of $100,000 and a basis of $40,000 to the Green Partnership in exchange for a 25% partnership interest. The partnership assumes the $80,000 mortgage on the land. Mary has a 25% share of partnership liabilities. The Green Partnership has $8,000 in liabilities immediately before Jane’s contribution. How much income does Jane recognize on the contribution?
What is Jane’s basis in her partnership interest?
7) The WE partnership reports the following items for its current tax year.
Operating income
Rental Income
Interest income
Tax Exempt municipal bonds
Corporate Bonds
Sec. 1231 gain
Sec. 1245 gain
Long Term Capital Gain
Rental Expenses
Salaries paid to employees (not partners) $30,000
Charitable Contributions
Interest paid relating to borrowings used
To finance municipal bonds
What is the WE partnership’s ordinary income for the current year?

8) Janice has a 30% interest in the Jansen Partnership. She is to receive a guaranteed payment for deductible services of $50,000. The partnership reports $30,000 of ordinary income and a $100,000 long- term capital gain before deducting the guaranteed partnership.
A) What is her income from the partnership?
B) What is her basis in her partnership basis at year-end?

9) Jerry has a 10% interest in the EKG partnership capital, profits, and losses. He is a limited partner. At the beginning of the current year, his basis in his partnership interest is $10,000. The partnership earned $20,000 of ordinary income this year and repaid $150,000 liability.
A) Is the repayment of the liability a taxable event for Jerry? If so, what are the amount and character of the income reported?


    • 7 years ago
    Advanced tax Accounting questions

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