FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 14: Partnerships and Limited Liability Entities

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

Essay

Review LaterAdd Note

Review Later

Match each of the following statements with the terms below that provide the best definition. a.Adjusted basis of each partnership asset. b.Operating expenses incurred after entity is formed but before it begins doing business. c.Each partner's basis in the partnership. d.Reconciles book income to taxable income. e.Tax accounting election made by partnership. f.Tax accounting calculation made by partner. g.Tax accounting election made by partner. h.Does not include liabilities. i.Designed to prevent excessive deferral of taxation of partnership income. j.Amount that may be received by partner for performance of services for the partnership. k.Theory under which a partnership's recourse debt is shared among the partners. l.Will eventually be allocated to partner making tax-free property contribution to partnership. m.Partner's share of partnership items. n.Must generally be satisfied by any allocation to the partners. o.Justification for a tax year other than the required taxable year. p.No correct match is provided. -Qualified business income deduction

Correct Answer

verified

Show Answer

Question 42

Multiple Choice

Review LaterAdd Note

Review Later

Concerning 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.

F) B) and C)
G) A) and B)

Correct Answer

verified

Show Answer

Question 43

Essay

Review LaterAdd Note

Match each of the following statements with the numbered terms below that provide the best definition. a.Organizational choice of many large accounting firms. b.Partner's percentage allocation of current operating income. c.Might affect any two partners' tax liabilities in different ways. d.Partnership in which partners are liable only for any partner's malpractice. e.Amount that might be reported on either form 1065, page 1 or, on Schedule K. f.Transfer of asset to partnership followed by immediate distribution of cash to partner. g.Must have at least one general and one limited partner. h.Long-term capital gain might be recharacterized as ordinary income.i.All partners are jointly and severally liable for entity debts. j.Theory treating the partner and partnership as separate economic units. k.Partner's basis in partnership interest after tax-free contribution of asset to partnership.l.Partnership's basis in asset after tax-free contribution of asset to partnership. m.One way to calculate a partner's economic interest in the partnership.n.Owners are members. o.Theory treating the partnership as a collection of taxpayers joined in an agency relationship.p.Participates in management. q.Not liable for entity debts. r.No correct match provided. -Carryover

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.

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?

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, because AMT and the foreign tax credit are calculated by the partnership.

Ryan is a 25% partner in the ROCC Partnership.At the beginning of the tax year, his 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.His basis in the partnership interest at the end of the year is:

Match each of the following statements with the terms below that provide the best definition. a.Adjusted basis of each partnership asset. b.Operating expenses incurred after entity is formed but before it begins doing business. c.Each partner's basis in the partnership. d.Reconciles book income to taxable income. e.Tax accounting election made by partnership. f.Tax accounting calculation made by partner. g.Tax accounting election made by partner. h.Does not include liabilities. i.Designed to prevent excessive deferral of taxation of partnership income. j.Amount that may be received by partner for performance of services for the partnership. k.Theory under which a partnership's recourse debt is shared among the partners. l.Will eventually be allocated to partner making tax-free property contribution to partnership. m.Partner's share of partnership items. n.Must generally be satisfied by any allocation to the partners. o.Justification for a tax year other than the required taxable year. p.No correct match is provided. -Required taxable year

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:

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.

Match each of the following statements with the numbered terms below that provide the best definition. a.Organizational choice of many large accounting firms. b.Partner's percentage allocation of current operating income. c.Might affect any two partners' tax liabilities in different ways. d.Partnership in which partners are liable only for any partner's malpractice. e.Amount that might be reported on either form 1065, page 1 or, on Schedule K. f.Transfer of asset to partnership followed by immediate distribution of cash to partner. g.Must have at least one general and one limited partner. h.Long-term capital gain might be recharacterized as ordinary income.i.All partners are jointly and severally liable for entity debts. j.Theory treating the partner and partnership as separate economic units. k.Partner's basis in partnership interest after tax-free contribution of asset to partnership.l.Partnership's basis in asset after tax-free contribution of asset to partnership. m.One way to calculate a partner's economic interest in the partnership.n.Owners are members. o.Theory treating the partnership as a collection of taxpayers joined in an agency relationship.p.Participates in management. q.Not liable for entity debts. r.No correct match provided. -Substituted

George and James are forming the GJ Partnership.George contributes $600,000 cash and James contributes nondepreciable property with an adjusted basis of $400,000 and a fair market value of $750,000.The property is subject to a $150,000 liability, which is transferred into the partnership and is shared equally by the partners for basis purposes.George and James share in all partnership profits equally except for any precontribution gain, which must be allocated according to the statutory rules for built-in gain allocations. a.What is James's adjusted tax basis for his partnership interest immediately after the partnership is formed? b.What is the partnership's adjusted basis for the property contributed by James? c.If the partnership sells the property contributed by James for $800,000, how is the tax gain allocated between the partners?

Match each of the following statements with the numbered terms below that provide the best definition. a.Organizational choice of many large accounting firms. b.Partner's percentage allocation of current operating income. c.Might affect any two partners' tax liabilities in different ways. d.Partnership in which partners are liable only for any partner's malpractice. e.Amount that might be reported on either form 1065, page 1 or, on Schedule K. f.Transfer of asset to partnership followed by immediate distribution of cash to partner. g.Must have at least one general and one limited partner. h.Long-term capital gain might be recharacterized as ordinary income.i.All partners are jointly and severally liable for entity debts. j.Theory treating the partner and partnership as separate economic units. k.Partner's basis in partnership interest after tax-free contribution of asset to partnership.l.Partnership's basis in asset after tax-free contribution of asset to partnership. m.One way to calculate a partner's economic interest in the partnership.n.Owners are members. o.Theory treating the partnership as a collection of taxpayers joined in an agency relationship.p.Participates in management. q.Not liable for entity debts. r.No correct match provided. -Aggregate concept

On the formation of a partnership, when might a disguised sale occur? How can this treatment be avoided?

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 that was valued at $30,000.Marshall contributed receivable that was valued at $100,000 and in which his basis was $0.Kevin has a basis in his partnership interest of $110,000 and Marshall's basis is $0.

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.

Match each of the following statements with the numbered terms below that provide the best definition. a.Organizational choice of many large accounting firms. b.Partner's percentage allocation of current operating income. c.Might affect any two partners' tax liabilities in different ways. d.Partnership in which partners are liable only for any partner's malpractice. e.Amount that might be reported on either form 1065, page 1 or, on Schedule K. f.Transfer of asset to partnership followed by immediate distribution of cash to partner. g.Must have at least one general and one limited partner. h.Long-term capital gain might be recharacterized as ordinary income.i.All partners are jointly and severally liable for entity debts. j.Theory treating the partner and partnership as separate economic units. k.Partner's basis in partnership interest after tax-free contribution of asset to partnership.l.Partnership's basis in asset after tax-free contribution of asset to partnership. m.One way to calculate a partner's economic interest in the partnership.n.Owners are members. o.Theory treating the partnership as a collection of taxpayers joined in an agency relationship.p.Participates in management. q.Not liable for entity debts. r.No correct match provided. -§704(b) book

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.

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

Which of the following would be currently taxable as ordinary income to the service partner if received in exchange for services performed for the partnership? (In all cases, assume that the interest is not sold within two years after the time it is granted to the service partner.)