Question 1

Match each of the following statements with the terms below that provide the best definition.
-Check the box regulations

Accepted Answer

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)  Brokerage and registration fees incurred for promoting and marketing partnership interests.
E)  Transfer of asset to partnership followed by immediate distribution of cash to partner.F) Must have at least one general and one limited partner.G) All partners are jointly and severally liable for entity debts.H) Theory treating the partner and partnership as separate economic units.I) Partner's basis in partnership interest after tax-free contribution of asset to partnership.J) Partnership's basis in asset after tax-free contribution of asset to partnership.K) Owners are "members."L) Theory treating the partnership as a collection of taxpayers joined in an agency relationship.M) Allows many unincorporated entities to select their Federal tax status.N) No correct match provided.O) C) and E)
P) J) and K)

Question 2

Match each of the following statements with the terms below that provide the best definition.
-Guaranteed payment

Accepted Answer

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.Q) F) and J)
R) H) and N)

Question 3

Morgan is a 50% managing member in the calendar year, cash basis MKK LLC.The LLC received $150,000 income from services and paid the following other amounts. $\begin{array}{lc}
\text { Rent expense } & \$ 10,000 \
\text { Salary expense to employees } & 40,000 \
\text { Payment to Morgan for services, per the operating agreement } & 40,000 \
\text { Distributions to partners, Kristin and Katie } & 12,000 \
\text { Payment to 30\% cash basis partner Katie for tax and accounting } & 10,000\\text { services }
\end{array}$ ​
How much will Morgan's adjusted gross income increase as a result of the above items? What amount will be included in Morgan's self-employment tax calculation?

Accepted Answer

$65,000 income and amount included in SE...

Question 4

The "inside basis" is defined as a partner's basis in the partnership interest.

Accepted Answer

A) True 
 B)False

Question 5

Ashley purchased her partnership interest from Lindsey on the first day of the current year for $40,000 cash.She received a $10,000 cash distribution from the partnership during the year, and her share of partnership income is $15,000.Her share of partnership liabilities on the last day of the partnership year is $20,000.Ashley's outside basis for her partnership interest at the end of the year is $45,000.

Accepted Answer

A) True 
 B)False

Question 6

Match each of the following statements with the terms below that provide the best definition.
-Schedule K-1

Accepted Answer

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.Q) A) and I)
R) I) and J)

Question 7

The sum of the partners' ending basis amounts on all Schedules K-1 equals the partners' ending capital account balance shown on the partnership's Schedule L.

Accepted Answer

A) True 
 B)False

Question 8

One of the disadvantages of the partnership form is that the partner's share of the partnership's taxable income is taxed to the partner, whether it is distributed.

Accepted Answer

A) True 
 B)False

Question 9

Emma's basis in her BBDE LLC interest is $60,000 at the beginning of the tax year.Her allocable share of LLC items are as follows: $20,000 of ordinary income, $2,000 tax-exempt interest income, and a $6,000 long-term capital gain.In addition, the LLC distributed $12,000 of cash to Emma during the year.Assuming the LLC had no liabilities at the beginning or the end of the year, Emma's ending basis in her LLC interest is $76,000.

Accepted Answer

A) True 
 B)False

Question 10

Morgan and Kristen formed an equal partnership on August 1 of the current year.Morgan contributed $60,000 cash and land with a basis of $18,000 and a fair market value of $40,000.Kristen contributed equipment with a basis of $42,000 and a value of $100,000.Kristen and Morgan each have a basis of $100,000 in their partnership interests.

Accepted Answer

A) True 
 B)False

Question 11

The amount of a partnership's income and loss from operating activities is combined with separately stated income and expenses to determine the partnership's equivalent of "taxable income." This amount is reconciled to book income on the partnership's Schedule M-1 or Schedule M-3.

Accepted Answer

A) True 
 B)False

Question 12

Match each of the following statements with the terms below that provide the best definition.
-Economic effect test

Accepted Answer

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.Q) D) and O)
R) G) and L)

Question 13

Which of the following statements is always correct regarding assets acquired by a newly formed partnership? If a partner contributes:

Accepted Answer

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) B) and C)
F) B) and D)

Question 14

Match each of the following statements with the terms below that provide the best definition.
-Limited liability partnership

Accepted Answer

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)  Brokerage and registration fees incurred for promoting and marketing partnership interests.
E)  Transfer of asset to partnership followed by immediate distribution of cash to partner.F) Must have at least one general and one limited partner.G) All partners are jointly and severally liable for entity debts.H) Theory treating the partner and partnership as separate economic units.I) Partner's basis in partnership interest after tax-free contribution of asset to partnership.J) Partnership's basis in asset after tax-free contribution of asset to partnership.K) Owners are "members."L) Theory treating the partnership as a collection of taxpayers joined in an agency relationship.M) Allows many unincorporated entities to select their Federal tax status.N) No correct match provided.O) E) and J)
P) B) and I)

Question 15

TEC Partners was formed during the current tax year.It incurred $10,000 of organizational expenses, $80,000 of startup expenses, and $5,000 of transfer taxes to retitle property contributed by a partner.The property had been held as MACRS property for ten years by the contributing partner, and had an adjusted basis to the partner of $300,000 and fair market value of $400,000.Which of the following statements is correct regarding these items?

Accepted Answer

A)  TEC treats the contributed property as a new MACRS asset placed in service on the date the property title is transferred.
B)  TEC must amortize the $10,000 of organizational expenses over 180 months.
C)  TEC's deducts the first $5,000 of startup expenses and amortizes the remainder over 180 months.
D)  TEC must capitalize the transfer tax and treat it as a new asset placed in service on the date the property is contributed.
E)  None of the above statements are true.F) C) and D)
G) A) and E)

Question 16

Which of the following statements is correct regarding the manner in which partnership liabilities are reflected in the partners' bases in their partnership interests?

Accepted Answer

A)  Nonrecourse debt is allocated to the partners according to their loss-sharing ratios.
B)  Recourse debt is allocated to the partners to the extent of the partnership's liabilities in excess of basis in the property.
C)  An increase in partnership debts results in a decrease in the partners' bases in the partnership interest.
D)  A decrease in partnership debt is treated as a distribution from the partnership to the partner and reduces the partner's basis in the partnership interest.
E)  Partnership debt is not reflected in the partners' bases in their partnership interests.F) None of the above
G) B) and C)

Question 17

Match each of the following statements with the terms below that provide the best definition.
-Startup costs

Accepted Answer

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.Q) D) and F)
R) A) and B)

Question 18

Brooke and John formed a partnership.Brooke received a 40% interest in partnership capital and profits in exchange for contributing land (basis of $30,000 and fair market value of $120,000) .John received a 60% interest in partnership capital and profits in exchange for contributing $180,000 of cash.Three years after the contribution date, the land contributed by Brooke is sold by the partnership to a third party for $150,000.How much taxable gain will Brooke recognize from the sale?

Accepted Answer

A)  $102,000
B)  $90,000
C)  $48,000
D)  $36,000
E)  $0F) D) and E)
G) B) and C)

Question 19

If a partnership earns tax-exempt income, the income should not affect the partners' bases in their partnership interests.Do you agree with this statement? Explain.

Accepted Answer

Partnership income is intended to be sub...

Question 20

Harry's basis in his partnership interest was $10,000 at the beginning of the tax year.For the year, his share of the partnership's loss was $8,000, and he also received a distribution of $4,000.Harry can deduct an $8,000 loss, and he recognizes a gain of $2,000 on the distribution of cash in excess of his remaining basis.

Accepted Answer

A) True 
 B)False

Exam 14: Partnerships and Limited Liability Entities

Correct Answer
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If a partnership earns tax-exempt income, the income should not affect the partners' bases in their partnership interests.Do you agree with this statement? Explain.

Correct Answer
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Partnership income is intended to be sub...
View Answer

Correct Answer
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Correct Answer
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$65,000 income and amount included in SE...
View Answer

Correct Answer
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The sum of the partners' ending basis amounts on all Schedules K-1 equals the partners' ending capital account balance shown on the partnership's Schedule L.

Correct Answer
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Match each of the following statements with the terms below that provide the best definition. -Startup costs

Correct Answer
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Correct Answer
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The amount of a partnership's income and loss from operating activities is combined with separately stated income and expenses to determine the partnership's equivalent of "taxable income." This amount is reconciled to book income on the partnership's Schedule M-1 or Schedule M-3.

Correct Answer
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Match each of the following statements with the terms below that provide the best definition. -Guaranteed payment

Correct Answer
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The "inside basis" is defined as a partner's basis in the partnership interest.

Correct Answer
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Which of the following statements is always correct regarding assets acquired by a newly formed partnership? If a partner contributes:

Correct Answer
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One of the disadvantages of the partnership form is that the partner's share of the partnership's taxable income is taxed to the partner, whether it is distributed.

Correct Answer
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Correct Answer
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Match each of the following statements with the terms below that provide the best definition. -Limited liability partnership

Correct Answer
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Match each of the following statements with the terms below that provide the best definition. -Check the box regulations

Correct Answer
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Correct Answer
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Which of the following statements is correct regarding the manner in which partnership liabilities are reflected in the partners' bases in their partnership interests?

Correct Answer
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Match each of the following statements with the terms below that provide the best definition. -Economic effect test

Correct Answer
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Match each of the following statements with the terms below that provide the best definition. -Schedule K-1

Correct Answer
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Exam 14: Partnerships and Limited Liability Entities

Correct AnswerverifiedShow Answer

If a partnership earns tax-exempt income, the income should not affect the partners' bases in their partnership interests.Do you agree with this statement? Explain.

Correct AnswerverifiedPartnership income is intended to be sub...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct Answerverified$65,000 income and amount included in SE...View AnswerShow Answer

Correct AnswerverifiedShow Answer

The sum of the partners' ending basis amounts on all Schedules K-1 equals the partners' ending capital account balance shown on the partnership's Schedule L.

Correct AnswerverifiedShow Answer

Match each of the following statements with the terms below that provide the best definition. -Startup costs

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The amount of a partnership's income and loss from operating activities is combined with separately stated income and expenses to determine the partnership's equivalent of "taxable income." This amount is reconciled to book income on the partnership's Schedule M-1 or Schedule M-3.

Correct AnswerverifiedShow Answer

Match each of the following statements with the terms below that provide the best definition. -Guaranteed payment

Correct AnswerverifiedShow Answer

The "inside basis" is defined as a partner's basis in the partnership interest.

Correct AnswerverifiedShow Answer

Which of the following statements is always correct regarding assets acquired by a newly formed partnership? If a partner contributes:

Correct AnswerverifiedShow Answer

One of the disadvantages of the partnership form is that the partner's share of the partnership's taxable income is taxed to the partner, whether it is distributed.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Match each of the following statements with the terms below that provide the best definition. -Limited liability partnership

Correct AnswerverifiedShow Answer

Match each of the following statements with the terms below that provide the best definition. -Check the box regulations

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is correct regarding the manner in which partnership liabilities are reflected in the partners' bases in their partnership interests?

Correct AnswerverifiedShow Answer

Match each of the following statements with the terms below that provide the best definition. -Economic effect test

Correct AnswerverifiedShow Answer

Match each of the following statements with the terms below that provide the best definition. -Schedule K-1

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Partnership income is intended to be sub...
View Answer

Correct Answer
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Correct Answer
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$65,000 income and amount included in SE...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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