Question 1

Landis received $90,000 cash and a capital asset basis of $50,000, fair market value of $60,000)  in a proportionate liquidating distribution. His basis in his partnership interest was $120,000 prior to the distribution. How much gain or loss does Landis recognize, and what is his basis in the asset received?

Accepted Answer

A)   $0 gain or loss; $30,000 basis.
B)   $0 gain or loss; $50,000 basis.
C)   $0 gain or loss; $60,000 basis.
D)   $20,000 gain; $50,000 basis.
E)   $30,000 gain; $60,000 basis.F) A) and B)
G) B) and D)

Question 2

The December 31 balance sheet of the RST General Partnership reads as follows.   Adjusted  Basis  FMV  Cash $65,000$65,000 Receivables −0−7,500 Capital and §1231 assets 55,000100,000 Total $120,000$172,500\begin{array} { l r r } & 	ext { Adjusted } \& 	ext { Basis } & 	ext { FMV } \	ext { Cash } & \$ 65,000 & \$ 65,000 \	ext { Receivables } & -0- & 7,500 \	ext { Capital and } \S 1231 	ext { assets } & {55,000}&{100,000} \	ext { Total } & \$ 120,000 & \$ 172,500\\hline\end{array} Cash  Receivables  Capital and §1231 assets  Total ​ Adjusted  Basis $65,000−0−55,000$120,000​ FMV $65,0007,500100,000$172,500​​    Roy, capital $40,000$57,500 Sue, capital 40,00057,500 Ted, capital 40,00057,500 Total $120,000$172,500\begin{array}{lrr}	ext { Roy, capital } & \$ 40,000 & \$ 57,500 \	ext { Sue, capital } & 40,000 & 57,500 \	ext { Ted, capital } & {40,000}&{57,500} \	ext { Total } & \$ 120,000 & \$ 172,500\end{array} Roy, capital  Sue, capital  Ted, capital  Total ​$40,00040,00040,000$120,000​$57,50057,50057,500$172,500​  The partners share equally in partnership capital, income, gain, loss, deduction, and credit. Ted's adjusted basis for his partnership interest is $40,000. On December 31, general partner Ted retires from the partnership, receiving a $60,000 cash payment in liquidation of his interest. The partnership agreement states that $2,500 of the payment is for goodwill. Which of the following statements about this distribution is false?

Accepted Answer

A)   If capital is not a material income-producing factor to the partnership, the § 736a)  payment will be $2,500.
B)   If capital is a material income-producing factor, the entire $60,000 payment will be a § 736b)  property payment.
C)   The payment for Ted's share of goodwill will create $2,500 of ordinary income to him.
D)   The partnership can deduct any amount that is a § 736a)  payment because it will be determined without regard to partnership profits.
E)   All statements are false. F) None of the above
G) D) and E)

Question 3

Match the following statements with the best match from the following choices. Choice M may be used more than once.
-Capital intensive partnership

Accepted Answer

A)  Includes the partner's share of partnership liabilities.
B)  Could result from sale of a partnership interest for more than the partner's share of the inside basis of assets.
C)  Liquidation payments from this type of partnership are always § 736b)  payments.
D)  Could arise if a distribution results in loss to the distributee partner.
E)  May be a § 736a)  payment.F) May receive § 736a)  payments.G) Probably treated as a general partner for § 736 purposesH) Conversion of an LLC to a C corporationI) Liquidation payments from this type of partnership may include § 736a)  payments.J) A § 736b)  payment.K) Adjustment designed to bring inside and outside bases into balance.L) Partnership asset basis is at least $250,000 > FMV.M) No correct match is provided.N) E) and J)
O) B) and G)

Question 4

Match the following statements with the best match from the following choices. Choice M may be used more than once.
-Limited liability partnership

Accepted Answer

A)  Includes the partner's share of partnership liabilities.
B)  Could result from sale of a partnership interest for more than the partner's share of the inside basis of assets.
C)  Liquidation payments from this type of partnership are always § 736b)  payments.
D)  Could arise if a distribution results in loss to the distributee partner.
E)  May be a § 736a)  payment.F) May receive § 736a)  payments.G) Probably treated as a general partner for § 736 purposesH) Conversion of an LLC to a C corporationI) Liquidation payments from this type of partnership may include § 736a)  payments.J) A § 736b)  payment.K) Adjustment designed to bring inside and outside bases into balance.L) Partnership asset basis is at least $250,000 > FMV.M) No correct match is provided.N) E) and I)
O) F) and K)

Question 5

Match the following statements with the best match from the following choices. Choice M may be used more than once.
-Section 754

Accepted Answer

A)  Includes the partner's share of partnership liabilities.
B)  Could result from sale of a partnership interest for more than the partner's share of the inside basis of assets.
C)  Liquidation payments from this type of partnership are always § 736b)  payments.
D)  Could arise if a distribution results in loss to the distributee partner.
E)  May be a § 736a)  payment.F) May receive § 736a)  payments.G) Probably treated as a general partner for § 736 purposesH) Conversion of an LLC to a C corporationI) Liquidation payments from this type of partnership may include § 736a)  payments.J) A § 736b)  payment.K) Adjustment designed to bring inside and outside bases into balance.L) Partnership asset basis is at least $250,000 > FMV.M) No correct match is provided.N) A) and D)
O) F) and M)

Question 6

Marcella is a 40% nonmanaging member treated as a limited partner)  in the MNO LLC in which capital is a material income-producing factor. MNO has inventory with a basis of $200,000 and a value of $250,000 but no other hot assets. Marcella's basis in the LLC interest is $80,000. If she receives a distribution of $180,000 cash in liquidation of her interest in the LLC, which one of the following statements is not true?

Accepted Answer

A)   Because this is a capital-intensive business, the entire payment is a §736b)  payment.
B)   Because Marcella is treated as a limited partner, the entire payment is a §736b)  payment.
C)   MNO can deduct the $20,000 paid for Marcella's share of ordinary income related to the inventory.
D)   Marcella will recognize ordinary income of $20,000 related to the inventory, because this is a disproportionate distribution.
E)   All of the above statements are true.F) A) and C)
G) A) and B)

Question 7

Josh owns a 25% capital and profits interest in the calendar year GDJ Partnership. His adjusted basis for his partnership interest on October 15 of the current year is $300,000. On that date, the partnership liquidates and makes a proportionate distribution of the following assets to Josh. $\begin{array}{lrr}&\text { Partnership's Basis in Asset} &\text { Asset's Fair Market Value }\
\text { Cash } & \$ 70,000 & \$ 70,000 \
\text { Inventory } & 120,000 & 150,000
\end{array}$ 
a. Calculate Josh's recognized gain or loss on the liquidating distribution, if any, and his basis in the distributed inventory.
How would your answer to
a. change if the partnership also distributed a small parcel of land it
b. had held for investment to Josh? Assume the land has a $5,000 adjusted basis FMV is $8,000)
to the partnership.

Accepted Answer

a. Josh takes a carryover basis of $120,...

Question 8

Beth sold her 25% partnership interest to Katie for $50,000 cash on July 1 the halfway point) of the current tax year. Katie also assumed Beth's share of the partnership's liabilities. Beth's basis in her partnership interest at the beginning of the year was $40,000, including a $15,000 share of partnership liabilities. The partnership's income for the entire year was $100,000, and Beth's share of partnership debt was $10,000 as of the date she sold the partnership interest. Assume the calendar year partnership has no hot assets, all of its income is earned evenly throughout the year, and the partnership uses the monthly proration method to allocate its income among the partners. Beth recognizes a gain of $12,500 on the sale.

Accepted Answer

A) True 
 B)False

Question 9

Match the following statements with the best match from the following choices. Choice K may be used more than once.
-Ordering rules

Accepted Answer

A)  Cash basis accounts receivable, for example.
B)  Fair market value exceeds 120% of basis.
C)  Inside basis of partnership property can be adjusted to reflect the purchase price paid.
D)  Terminates the partner's interest in the partnership.
E)  Ordinary income-producing items.F) Cash, then inventory and unrealized receivables, and then other assets.G) Does not eliminate the partner's interest in the partnership.H) Changes the partner's or the partnership's ordinary income potential.I) Any partnership assets other than cash, capital, or § 1231 assets.J) Sometimes treated as an unrealized receivable.K) No correct match provided.L) D) and H)
M) A) and K)

Question 10

Match the following statements with the best match from the following choices. Choice K may be used more than once.
-Substantially appreciated inventory

Accepted Answer

A)  Cash basis accounts receivable, for example.
B)  Fair market value exceeds 120% of basis.
C)  Inside basis of partnership property can be adjusted to reflect the purchase price paid.
D)  Terminates the partner's interest in the partnership.
E)  Ordinary income-producing items.F) Cash, then inventory and unrealized receivables, and then other assets.G) Does not eliminate the partner's interest in the partnership.H) Changes the partner's or the partnership's ordinary income potential.I) Any partnership assets other than cash, capital, or § 1231 assets.J) Sometimes treated as an unrealized receivable.K) No correct match provided.L) J) and K)
M) D) and H)

Question 11

Match the following statements with the best match from the following choices. Choice K may be used more than once.
-Inventory

Accepted Answer

A)  Cash basis accounts receivable, for example.
B)  Fair market value exceeds 120% of basis.
C)  Inside basis of partnership property can be adjusted to reflect the purchase price paid.
D)  Terminates the partner's interest in the partnership.
E)  Ordinary income-producing items.F) Cash, then inventory and unrealized receivables, and then other assets.G) Does not eliminate the partner's interest in the partnership.H) Changes the partner's or the partnership's ordinary income potential.I) Any partnership assets other than cash, capital, or § 1231 assets.J) Sometimes treated as an unrealized receivable.K) No correct match provided.L) B) and C)
M) C) and H)

Question 12

Last year, Darby contributed land basis of $60,000, fair market value of $80,000)  to the Seagull LLC in exchange for a 25% interest in the LLC. In the current year, the LLC distributes the land now worth $82,000)  to Shelby, who is also a 25% owner. Immediately prior to the distribution, Darby's basis in the LLC was $70,000, and Shelby's basis in the LLC was $110,000. How much gain or loss must be recognized and by whom? What is Shelby's basis in the property she receives and Darby's basis in her partnership interest following the distribution?

Accepted Answer

A)   No gain or loss; Shelby's basis in the property is $80,000; Darby's basis in interest is $70,000.
B)   $20,000 gain recognized by Darby; Shelby's basis in the property is $80,000; Darby's basis in interest is $90,000.
C)   $22,000 gain recognized by Darby; Shelby's basis in the property is $82,000; Darby's basis in interest is $92,000.
D)   $20,000 gain recognized by Shelby; Shelby's basis in the property is $80,000; Darby's basis in interest is $90,000.
E)   $22,000 gain recognized by Shelby; Shelby's basis in the property is $82,000; Darby's basis in interest is $92,000.F) None of the above
G) A) and B)

Question 13

Match the following statements with the best match from the following choices. Choice K may be used more than once.
-Liquidating distribution

Accepted Answer

A)  Cash basis accounts receivable, for example.
B)  Fair market value exceeds 120% of basis.
C)  Inside basis of partnership property can be adjusted to reflect the purchase price paid.
D)  Terminates the partner's interest in the partnership.
E)  Ordinary income-producing items.F) Cash, then inventory and unrealized receivables, and then other assets.G) Does not eliminate the partner's interest in the partnership.H) Changes the partner's or the partnership's ordinary income potential.I) Any partnership assets other than cash, capital, or § 1231 assets.J) Sometimes treated as an unrealized receivable.K) No correct match provided.L) B) and D)
M) A) and I)

Question 14

Serena owns a 40% interest in the RST LLP. Partnership assets consist of land fair market value of $100,000, basis of $80,000), accounts receivable fair market value of $120,000, basis of $0), and cash of $180,000. Serena sells her interest in RST to Jaclyn for cash of $140,000. In addition, Jaclyn assumes Serena's $40,000 share of the LLP's liabilities. Serena's basis in the partnership interest including her share of the partnership's liabilities) is $120,000 immediately before the sale.
a. How much gain or loss does Serena recognize and what is its character?
b. What is Jaclyn's basis in the partnership interest?
c. If the LLP has a § 754 election in effect, how much is the adjustment and to which partners) is it allocated?

Accepted Answer

a. Serena recognizes a gain of $60,000, ...

Question 15

Roman was a 40% partner in the calendar year POR LLC. When Roman died on April 30, the interest transferred to his estate. On November 1 of that year, Tiwanda, an unrelated third party, negotiated a buyout and acquired Roman's interest with the approval of the other LLC members) . The LLC's operating agreement provides that a monthly allocation will be used to prorate income when required. If the LLC's income for the year was $300,000, how will it be allocated?

Accepted Answer

A)   $0 to Roman, $0 to Roman's estate, $120,000 to Tiwanda.
B)   $40,000 to Roman, $60,000 to Roman's estate, $20,000 to Tiwanda.
C)   $0 to Roman, $100,000 to Roman's estate, $20,000 to Tiwanda.
D)   $100,000 to Roman, $0 to Roman's estate, $20,000 to Tiwanda.
E)   $0 to Roman, $120,000 to Roman's estate, $0 to Tiwanda.F) None of the above
G) C) and E)

Question 16

Anthony's basis in the WAM Partnership interest was $200,000 just before he received a proportionate liquidating distribution consisting of investment land basis of $90,000, fair market value of $100,000) , and inventory basis of $30,000, fair market value of $70,000) . After the distribution, Anthony's recognized gain or loss and his basis in the land and inventory are:

Accepted Answer

A)   $80,000 loss; $90,000 land) ; $30,000 inventory) .
B)   $70,000 loss; $100,000 land) ; $30,000 inventory) .
C)   $30,000 loss; $100,000 land) ; $70,000 inventory) .
D)   $30,000 loss; $90,000 land) ; $30,000 inventory) .
E)   $0 gain or loss; $170,000 land) ; $30,000 inventory) .F) None of the above
G) B) and E)

Question 17

Match the following statements with the best match from the following choices. Choice K may be used more than once.
-Unrealized receivable

Accepted Answer

A)  Cash basis accounts receivable, for example.
B)  Fair market value exceeds 120% of basis.
C)  Inside basis of partnership property can be adjusted to reflect the purchase price paid.
D)  Terminates the partner's interest in the partnership.
E)  Ordinary income-producing items.F) Cash, then inventory and unrealized receivables, and then other assets.G) Does not eliminate the partner's interest in the partnership.H) Changes the partner's or the partnership's ordinary income potential.I) Any partnership assets other than cash, capital, or § 1231 assets.J) Sometimes treated as an unrealized receivable.K) No correct match provided.L) A) and F)
M) All of the above

Question 18

Which of the following is not typically considered a hot asset?

Accepted Answer

A)   Accounts receivable of a cash basis partnership.
B)   Inventory with a basis of $16,000 and a fair market value of $15,000.
C)   Depreciation recapture potential.
D)   Land held for development.
E)   All of these typically are considered to be hot assets.F) A) and B)
G) A) and C)

Question 19

Match the following independent distribution payments in liquidation of a partner's interest in an ongoing partnership with the statements below.
-Distribution of $100,000 cash to a managing member general partner)  in a cash basis service-oriented LLC for the member's share of unrealized receivables and land.

Accepted Answer

A)  A payment for the partner's share of partnership income under § 736a) .
B)  A payment for the partner's share of partnership property under § 736b) .
C)  The payment includes both a § 736a)  and a § 736b)  element.D) All of the above
E) A) and C)

Question 20

In addition to its other assets, BC LLC owns unrealized receivables basis = $0, fair market value = $60,000). If BC
distributes $60,000 cash to Bart and the unrealized receivable to Charles, then Bart will recognize ordinary income of
$30,000 and Charles will have a basis of $30,000 in receivables valued at $60,000.

Accepted Answer

A) True 
 B)False

Exam 11: Partnerships: Distributions, Transfer of Interests, and Terminations

Match the following statements with the best match from the following choices. Choice M may be used more than once. -Limited liability partnership

Correct Answer
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Match the following statements with the best match from the following choices. Choice K may be used more than once. -Unrealized receivable

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Match the following statements with the best match from the following choices. Choice M may be used more than once. -Section 754

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Match the following statements with the best match from the following choices. Choice M may be used more than once. -Capital intensive partnership

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Match the following statements with the best match from the following choices. Choice K may be used more than once. -Liquidating distribution

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Match the following statements with the best match from the following choices. Choice K may be used more than once. -Substantially appreciated inventory

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Match the following statements with the best match from the following choices. Choice K may be used more than once. -Ordering rules

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a. Josh takes a carryover basis of $120,...
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Which of the following is not typically considered a hot asset?

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a. Serena recognizes a gain of $60,000, ...
View Answer

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Match the following statements with the best match from the following choices. Choice K may be used more than once. -Inventory

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Exam 11: Partnerships: Distributions, Transfer of Interests, and Terminations

Match the following statements with the best match from the following choices. Choice M may be used more than once. -Limited liability partnership

Correct AnswerverifiedShow Answer

Match the following statements with the best match from the following choices. Choice K may be used more than once. -Unrealized receivable

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Match the following statements with the best match from the following choices. Choice M may be used more than once. -Section 754

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Match the following statements with the best match from the following choices. Choice M may be used more than once. -Capital intensive partnership

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Correct AnswerverifiedShow Answer

Match the following statements with the best match from the following choices. Choice K may be used more than once. -Liquidating distribution

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Match the following statements with the best match from the following choices. Choice K may be used more than once. -Substantially appreciated inventory

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Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Match the following statements with the best match from the following choices. Choice K may be used more than once. -Ordering rules

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Correct Answerverifieda. Josh takes a carryover basis of $120,...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not typically considered a hot asset?

Correct AnswerverifiedShow Answer

Correct Answerverifieda. Serena recognizes a gain of $60,000, ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Match the following statements with the best match from the following choices. Choice K may be used more than once. -Inventory

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Correct AnswerverifiedShow Answer

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a. Josh takes a carryover basis of $120,...
View Answer

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a. Serena recognizes a gain of $60,000, ...
View Answer

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