Exam 14: Partnerships and Limited Liability Entities

A) $0 gain or loss.
B) $36,000 ordinary income.
C) $36,000 capital gain.
D) $60,000 ordinary income.
E) $60,000 capital gain.

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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.

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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 only liable for torts and malpractice.
E) Expense 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.

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A) Depreciable property: the partnership treats the property as newly acquired depreciable property, and may claim a § 179 deduction.
B) Unrealized cash-basis) receivables: the partnership will report a capital gain when the receivable is collected.
C) Inventory in the partner's hands) : the partnership reports ordinary income if the property is held as a capital asset and sold within five years of the contribution date.
D) Land valued at less than its basis: the partnership reports a § 1231 loss if the property is sold at a loss.
E) All of the above statements are always true.

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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.

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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.

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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.

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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 only liable for torts and malpractice.
E) Expense 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.

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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.

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A) $54,000 ordinary income; $9,000 charitable contribution.
B) $60,000 ordinary income; $9,000 charitable contribution.
C) $36,000 ordinary income.
D) $54,000 ordinary income.
E) None of the above is correct.

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A) A partnership is a tax paying entity for Federal income tax purposes.
B) Partnership income is comprised of ordinary partnership income or loss and separately stated items.
C) A partnership is required to file a return with the IRS.
D) A partner's profit-sharing percent may differ from the partner's loss-sharing percent.
E) All of these statements are correct.

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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 only liable for torts and malpractice.
E) Expense 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.

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