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Partnership Taxation
Partnership Taxation MCQs
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At partnership inception, Black acquires a 50% interest in Decorators Partnership by contributing property with an adjusted basis of $250,000. Black...
I only.
II only.
Both I and II.
Neither I nor II.
?
On June 1, 2013, Kelly received a 10% interest in Rock Co., a partnership, for services contributed to the partnership. Rock’s net assets at that ...
$ 7,000 ordinary income.
$ 7,000 capital gain.
$10,000 ordinary income.
$10,000 capital gain.
?
The holding period of property acquired by a partnership as a contribution to the contributing partner’s capital account
Begins with the date of contribution to the partnership.
Includes the period during which the property was held by the contributing partner.
Is equal to the contributing partner’s holding period prior to contribution to the partnership.
Depends on the character of the property transferred.
?
The holding period of a partnership interest acquired in exchange for a contributed capital asset begins on the date
The partner is admitted to the partnership.
The partner transfers the asset to the partnership.
The partner’s holding period of the capital asset began.
The partner is first credited with the proportionate share of partnership capital.
?
The following information pertains to Carr’s admission to the Smith & Jones partnership on July 1, 2012: • Carr’s contribution of capital: 800...
$120,000 ordinary income.
$120,000 long-term capital gain.
$120,000 Section 1231 gain.
$0.
?
On September 1, 2012, James Elton received a 25% capital interest in Bredbo Associates, a partnership, in return for services rendered plus a contri...
$25,000
$35,000
$40,000
$50,000
?
Basic Partnership, a cash-basis calendar-year entity, began business on February 1, 2013. Basic incurred and paid the following during 2013: Filing...
$15,600
$ 3,600
$ 660
$ 220
?
Thompson’s basis in Starlight Partnership was $60,000 at the beginning of the year. Thompson materially participates in the partnership’s busine...
$15,000
$40,000
$55,000
$65,000
?
In computing the ordinary income of a partnership, a deduction is allowed for
Contributions to recognized charities.
The first $100 of dividends received from qualifying domestic corporations.
Short-term capital losses.
Guaranteed payments to partners.
?
Which of the following limitations will apply in determining a partner’s deduction for that partner’s share of partnership losses? At-risk . . ...
Yes No
No Yes
Yes Yes
No No
?
Dunn and Shaw are partners who share profits and losses equally. In the computation of the partnership’s 2012 book income of $100,000, guaranteed ...
$100,000
$101,000
$160,000
$161,000
?
The partnership of Martin & Clark sustained an ordinary loss of $84,000 in 2012. The partnership, as well as the two partners, are on a calendar-yea...
Ordinary loss of $36,000.
Ordinary loss of $42,000.
Ordinary loss of $36,000 and a capital loss of $6,000.
Capital loss of $42,000.
?
The partnership of Felix and Oscar had the following items of income during the taxable year ended December 31, 2012. Income from operations $156,00...
$156,000
$174,000
$176,000
$182,000
?
The partnership of Felix and Oscar had the following items of income during the taxable year ended December 31, 2012. Income from operations $156,00...
$156,000
$174,000
$176,000
$182,000
?
A guaranteed payment by a partnership to a partner for services rendered, may include an agreement to pay I. A salary of $5,000 monthly without rega...
I only.
II only.
Both I and II.
Neither I nor II.
?
Chris, a 25% partner in Vista partnership, received a $20,000 guaranteed payment in 2012 for deductible services rendered to the partnership. Guaran...
$37,500
$27,500
$22,500
$20,000
?
On January 2, 2012, Arch and Bean contribute cash equally to form the JK Partnership. Arch and Bean share profits and losses in a ratio of 75% to 25...
$ 5,000
$10,000
$20,000
$30,000
?
Guaranteed payments made by a partnership to partners for services rendered to the partnership, that are deductible business expenses under the Inte...
I only.
II only.
Both I and II.
Neither I nor II.
?
The method used to depreciate partnership property is an election made by
The partnership and must be the same method used by the “principal partner.”
The partnership and may be any method approved by the IRS.
The “principal partner.”
Each individual partner
?
Under the Internal Revenue Code sections pertaining to partnerships, guaranteed payments are payments to partners for
Payments of principal on secured notes honored at maturity.
Timely payments of periodic interest on bona fide loans that are not treated as partners’ capital.
Services or the use of capital without regard to partnership income.
Sales of partners’ assets to the partnership at guaranteed amounts regardless of market values.
?
Dale’s distributive share of income from the calendar-year partnership of Dale & Eck was $50,000 in 2012. On December 15, 2012, Dale, who is a cas...
$27,000
$37,000
$50,000
$60,000
?
At December 31, 2011, Alan and Baker were equal partners in a partnership with net assets having a tax basis and fair market value of $100,000. On J...
$0
$ 3,000
$ 6,000
$12,000
?
Gilroy, a calendar-year taxpayer, is a partner in the firm of Adams and Company which has a fiscal year ending June 30. The partnership agreement pr...
$25,000
$30,500
$34,000
$39,000
?
On December 31, 2011, Edward Baker gave his son, Allan, a gift of a 50% interest in a partnership in which capital is a material income-producing fa...
$20,000
$30,000
$40,000
$50,000
?
Flagg and Miles are each 50% partners in Decor Partnership. Each partner had a $200,000 tax basis in the partnership on January 1, 2012. Decor’s 2...
$15,000
$18,750
$22,500
$37,500
?
Flagg and Miles are each 50% partners in Decor Partnership. Each partner had a $200,000 tax basis in the partnership on January 1, 2012. Decor’s 2...
$211,250
$215,000
$218,750
$222,500
?
Peters has a one-third interest in the Spano Partnership. During 2012, Peters received a $16,000 guaranteed payment, which was deductible by the par...
I only.
II only.
Both I and II.
Neither I nor II.
?
Dean is a 25% partner in Target Partnership. Dean’s tax basis in Target on January 1, 2012, was $20,000. At the end of 2012, Dean received a nonli...
$15,000
$23,000
$25,000
$30,000
?
On January 4, 2012, Smith and White contributed $4,000 and $6,000 in cash, respectively, and formed the Macro General Partnership. The partnership a...
Increases Smith’s partnership basis by $16,000.
Increases Smith’s partnership basis by $20,000.
Increases Smith’s partnership basis by $24,000.
Has no effect on Smith’s partnership basis.
?
Gray is a 50% partner in Fabco Partnership. Gray’s tax basis in Fabco on January 1, 2012, was $5,000. Fabco made no distributions to the partners ...
$21,000
$16,000
$12,000
$10,000
?
On January 1, 2013, Kane was a 25% equal partner in Maze General Partnership, which had partnership liabilities of $300,000. On January 2, 2013, a n...
Has no effect.
Decrease of $35,000.
Increase of $15,000.
Decrease of $75,000.
?
Lee inherited a partnership interest from Dale during 2013. The adjusted basis of Dale’s partnership interest was $50,000, and its fair market val...
$70,000
$50,000
$20,000
$0
?
Hall and Haig are equal partners in the firm of Arosa Associates. On January 1, 2012, each partner’s adjusted basis in Arosa was $40,000. During 2...
$35,000
$40,000
$65,000
$70,000
?
Doris and Lydia are sisters and also are equal partners in the capital and profits of Agee & Nolan. The following information pertains to 300 shares...
$5,000
$3,000
$2,500
$0
?
In March 2013, Lou Cole bought 100 shares of a listed stock for $10,000. In May 2013, Cole sold this stock for its fair market value of $16,000 to t...
$6,000
$4,000
$2,000
$0
?
Kay Shea owns a 55% interest in the capital and profits of Dexter Communications, a partnership. In 2013, Kay sold an oriental lamp to Dexter for $5...
$4,000 ordinary income.
$4,000 long-term capital gain.
$2,200 ordinary income.
$1,800 long-term capital gain.
?
Gladys Peel owns a 50% interest in the capital and profits of the partnership of Peel and Poe. On July 1, 2012, Peel bought land the partnership had...
$47,000
$48,500
$49,000
$50,000
?
Under Section 444 of the Internal Revenue Code, certain partnerships can elect to use a tax year different from their required tax year. One of the ...
Be a limited partnership.
Be a member of a tiered structure.
Choose a tax year where the deferral period is not longer than three months.
Have less than seventy-five partners.
?
Which one of the following statements regarding a partnership’s tax year is correct?
A partnership formed on July 1 is required to adopt a tax year ending on June 30.
A partnership may elect to have a tax year other than the generally required tax year if the deferral period for the tax year elected does not exceed three months.
A “valid business purpose” can no longer be claimed as a reason for adoption of a tax year other than the generally required tax year.
Within thirty days after a partnership has established a tax year, a form must be filed with the IRS as notification of the tax year adopted.
?
Without obtaining prior approval from the IRS, a newly formed partnership may adopt
A taxable year which is the same as that used by one or more of its partners owning an aggregate interest of more than 50% in profits and capital.
A calendar year, only if it comprises a twelve-month period.
A January 31 year-end if it is a retail enterprise, and all of its principal partners are on a calendar year.
Any taxable year that it deems advisable to select.
?
Irving Aster, Dennis Brill, and Robert Clark were partners who shared profits and losses equally. On February 28, 2012, Aster sold his interest to P...
Aster $10,000, Brill $0, Estate of Brill $15,000, Clark $15,000, and Dexter $5,000.
Aster $10,000, Brill $11,250, Estate of Brill $3,750, Clark $15,000, and Dexter $5,000.
Aster $0, Brill $11,250, Estate of Brill $3,750, Clark $15,000, and Dexter $15,000.
Aster $0, Brill $0, Estate of Brill $15,000, Clark $15,000, and Dexter $15,000.
?
Curry’s sale of her partnership interest causes a partnership termination. The partnership’s business and financial operations are continued by ...
I only.
II only.
Both I and II.
Neither I nor II.
?
Cobb, Danver, and Evans each owned a one-third interest in the capital and profits of their calendar-year partnership. On September 18, 2012, Cobb a...
Terminated on September 18, 2012.
Terminated on December 31, 2012.
Terminated on March 15, 2013.
Did not terminate.
?
Partnership Abel, Benz, Clark & Day is in the real estate and insurance business. Abel owns a 40% interest in the capital and profits of the partner...
Partnership Abel & Benz is considered to be a continuation of Partnership Abel, Benz, Clark & Day.
In forming Partnership Clark & Day, partners Clark and Day are subject to a penalty surtax if they contribute their entire distributions from Partnership Abel, Benz, Clark & Day.
Before separating the two businesses into two distinct entities, the partners must obtain approval from the IRS.
Before separating the two businesses into two distinct entities, Partnership Abel, Benz, Clark & Day must file a formal dissolution with the IRS on the prescribed form.
?
Under which of the following circumstances is a partnership that is not an electing large partnership considered terminated for income tax purposes?...
I only.
II only.
Both I and II.
Neither I nor II.
?
David Beck and Walter Crocker were equal partners in the calendar-year partnership of Beck & Crocker. On July 1, 2013, Beck died. Beck’s estate be...
April 30, 2013.
December 31, 2013.
July 31, 2012.
July 1, 2012.
?
On December 31, 2012, after receipt of his share of partnership income, Clark sold his interest in a limited partnership for $30,000 cash and relief...
Ordinary loss of $10,000.
Ordinary gain of $15,000.
Capital loss of $10,000.
Capital gain of $15,000.
?
On April 1, 2012, George Hart, Jr. acquired a 25% interest in the Wilson, Hart, and Company partnership by gift from his father. The partnership int...
A long-term capital gain of $25,000.
A short-term capital gain of $25,000.
A long-term capital gain of $35,000.
A short-term capital gain of $35,000.
?
On June 30, 2012, James Roe sold his interest in the calendar-year partnership of Roe & Doe for $30,000. Roe’s adjusted basis in Roe & Doe at June...
$0
$15,000
$22,500
$30,000
?
Stone and Frazier decided to terminate the Woodwest Partnership as of December 31. On that date, Woodwest’s balance sheet was as follows: Cash $2...
$0
$250
$300
$500
?
Curry’s adjusted basis in Vantage Partnership was $5,000 at the time he received a nonliquidating distribution of land. The land had an adjusted b...
$9,000
$6,000
$5,000
$1,000
?
Hart’s adjusted basis in Best Partnership was $9,000 at the time he received the following nonliquidating distribution of partnership property: C...
$0
$ 4,000
$ 7,000
$10,000
?
Day’s adjusted basis in LMN Partnership interest is $50,000. During the year Day received a nonliquidating distribution of $25,000 cash plus land ...
$10,000
$15,000
$20,000
$25,000
?
The adjusted basis of Jody’s partnership interest was $50,000 immediately before Jody received a current distribution of $20,000 cash and property...
$0
$ 5,000
$10,000
$20,000
?
The adjusted basis of Jody’s partnership interest was $50,000 immediately before Jody received a current distribution of $20,000 cash and property...
$0
$30,000
$35,000
$40,000
?
On June 30, 2012, Berk, a calendar-year taxpayer, retired from his partnership. At that time, his capital account was $50,000 and his share of the p...
$13,333 $26,667
20,000 20,000
40,000 --
-- 40,000
?
The basis to a partner of property distributed in complete liquidation of the partner’s interest is the
Adjusted basis of the partner’s interest increased by any cash distributed to the partner in the same transaction.
Adjusted basis of the partner’s interest reduced by any cash distributed to the partner in the same transaction.
Adjusted basis of the property to the partnership.
Fair market value of the property.
?
In 2008, Lisa Bara acquired a one-third interest in Dee Associates, a partnership. In 2013, when Lisa’s entire interest in the partnership was liq...
$0.
$2,000 short-term capital loss.
$2,000 long-term capital loss.
$2,000 ordinary loss.
?
For tax purposes, a retiring partner who receives retirement payments ceases to be regarded as a partner a. On the last day of the taxable year in w...
Not taxable.
Ordinary income.
Short-term capital gain.
Long-term capital gain
?
John Albin is a retired partner of Brill & Crum, a personal service partnership. Albin has not rendered any services to Brill & Crum since his retir...
Not taxable.
Ordinary income.
Short-term capital gain.
Long-term capital gain
