Question 1 On July 1 of the current year, Ambrose was admitted to the partnership of Ambrose and Nectar. His contribution to capital consisted of 500 shares of stock in Paniculata Corporation, which he bought in 2000 for $10,000 and which had a fair market value of $50,000 on July 1, 2015. Ambrose's interest in the partnership's capital and profits is 25 percent. On July 1, 2015, the fair market value of the partnership's net assets (after Ambrose was admitted) was $200,000. What is Ambrose's taxable gain in 2015 on the exchange of stock for his partnership interest? Select one:
a. $0 gain or lossb. $40,000 ordinary incomec. $40,000 long-term capital gaind. $40,000 Section 1231 gaine. None of the above
Question 2
Which of the following liabilities would be considered nonrecourse? Select one:
a. A bank loan for which the taxpayer is personally liable.b. Credit card debt.c. A $20,000 real estate loan which allows the bank to take the real estate if the taxpayer stops making payments on the loan.d. All of the above are nonrecourse liabilities.
Question 3
Kitty is a 60 percent partner of Tabby Associates. Kitty sells a building to the partnership for $75,000. If the building had an adjusted basis to Kitty of $95,000, how much gain or loss does Kitty recognize on this transaction? Select one:
a. $95,000 lossb. $20,000 lossc. $0 gain or lossd. $20,000 gaine. None of the above
Question 4
Nash and Ford are partners who share profits and losses equally. For the current tax year, the partnership hadbookincome of $70,000 which included the following deductions:
Guaranteed payments to partners:
Nash
$35,000
Ford
25,000
Charitable contributions
5,000
What amount should be reported as ordinary income on the partnership return for the current tax year?
Select one:
a. $75,000b. $85,000c. $130,000d. $135,000e. None of the above
Question 5
Which one of the following is not true about partnerships? Select one:
a. There must be two or more owners.b. General partners assume more risk of legal liability than limited partners.c. An LLC limits certain liability risks.d. A partnership is taxed like a corporation.e. All of the above are true.
Question 6
Jim's basis in his partnership is $200,000. His share of the current year partnership income is $60,000. The partnership paid him a $75,000 distribution in the current year. What is his new basis in the partnership at the end of the year and what is his taxable income from the partnership? Select one:
a. $200,000; $75,000b. $260,000; $60,000c. $140,000; $60,000d. $185,000; $60,000e. $185,000; $135,000
Question 7
Which of the following items must be reported separately from ordinary income or loss on a partnership return? Select one:
a. Capital lossesb. Miscellaneous incomec. Cost of goods soldd. Sales incomee. None of the above
Question 8
An equal partnership is formed by Rita and Gerry. Rita contributes cash of $10,000 and a building with a fair market value of $150,000, adjusted basis of $55,000, and subject to a liability of $60,000. Gerry contributes cash of $100,000. What amount of gain must Rita recognize as a result of this transaction? Select one:
a. $95,000b. $35,000c. $5,000d. $0e. None of the above
Question 9
Jordan files his income tax return on a calendar-year basis. He is the principal partner of a partnership reporting on a June 30 fiscal year end basis. Jordan's share of the partnership's ordinary income was $24,000 for the fiscal year ended June 30, 2015, and $72,000 for the fiscal year ended June 30, 2016. How much should Jordan report on his 2015 individual income tax return as his share of taxable income from the partnership? Select one:
a. $24,000b. $36,000c. $48,000d. $72,000e. None of the above
Question 10
At the beginning of the year, Joe's basis in his partnership interest was $5,000. During the year, Joe contributed $10,000 in cash to the partnership and signed a bank loan to be personally liable for the partnership's debt of $25,000. For the current year, the partnership allocated a loss of $60,000 to Joe. In the following year, Joe's portion of the partnership income is $30,000. Which of the following is accurate? Select one:
a. In the following year, Joe's reportable taxable income from the partnership is $10,000.b. Joe's basis in his partnership at the end of the year is $15,000.c. Joe may deduct all of the $60,000 loss in the current year.d. Joe may carry over a $45,000 loss to the following year.