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| 1.
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Stephanie performs services in exchange for a 10% capital interest in High Rental Partnership. The services were worth $25,000. The tax implications to Stephanie are: |
| | A) | No taxable income and a partnership interest with a basis of $0. |
| | B) | No taxable income and a partnership interest with a basis of $25,000. |
| | C) | $25,000 of taxable income and a partnership interest with a basis of $0. |
| | D) | $25,000 of taxable income and a partnership interest with a basis of $25,000. |
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| 2.
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Coltrain contributes land with a FMV of $17,000 and a basis of $12,000 to a partnership in return for a 5% partnership interest in CBD partnership. Coltrain's basis in the partnership is: |
| | A) | $0. |
| | B) | $850. |
| | C) | $12,000. |
| | D) | $17,000. |
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| 3.
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Coltrain contributes land with a FMV of $17,000 and a basis of $12,000 to a partnership in return for a 5% partnership interest in CBD partnership. What is CBD partnership's basis in the land received from Coltrain? |
| | A) | $0. |
| | B) | $600. |
| | C) | $12,000. |
| | D) | $17,000. |
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| 4.
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Randle has a Schedule C with the following assets:| | Basis | FMV | | Cash | $9,000 | $9,000 | | A/R | $0 | $20,000 | | Building | $190,000 | $125,000 |
Randle contributes the above assets to form RJ's Partnership and receives a 40% interest. Randle's basis in the partnership interest is: |
| | A) | $0. |
| | B) | $79,600. |
| | C) | $154,000. |
| | D) | $199,000. |
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| 5.
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All of the following are considered ordinary items to a partnership except: |
| | A) | Depreciation expense. |
| | B) | Section 179 deduction. |
| | C) | Payroll Taxes. |
| | D) | Health care insurance for employees. |
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| 6.
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Cory, Spencer, and Benjamin form the CSB partnership. Cory owned 33.3% from January 1, 2006 to August 1, 2006, when he bought Spencer's 33.3% interest. He owed 66.6% for the rest of the year. The partnership had ordinary income of $100,000. Absent any special allocations in a partnership agreement, Cory's share of ordinary income for the year is (be careful of rounding): |
| | A) | $33,330. |
| | B) | $47,219. |
| | C) | $66,666. |
| | D) | $100,000. |
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| 7.
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All of the following are considered separately stated items to a partnership except: |
| | A) | Capital losses. |
| | B) | Interest income. |
| | C) | Interest expense to purchase equipment. |
| | D) | Section 179 expense. |
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| 8.
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All of the following partnership items are used to calculate a partner's self-employment income except: |
| | A) | Partner guaranteed payment. |
| | B) | Rental income. |
| | C) | Partner share of ordinary income. |
| | D) | Section 179 expense. |
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| 9.
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Ash is a 20% partner in a partnership. The partnership pays Ash a guaranteed payment of $65,000 per year. If the partnership's ordinary income is $45,000 before considering the guaranteed payment, the partnership will report ordinary income (loss) of: |
| | A) | ($20,000). |
| | B) | $0. |
| | C) | $20,000. |
| | D) | $65,000. |
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| 10.
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The calculation of a partner's basis in his partnership interest is mandatory in which of the following situations: |
| | A) | The year in which the partner purchases his or her interest. |
| | B) | When a new partner enters the partnership. |
| | C) | In a partnership loss year. |
| | D) | At the end of each year. |
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| 11.
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Each of the following affect the basis of a partnership interest except: |
| | A) | Cash or property distributed. |
| | B) | Rental income. |
| | C) | Qualified non-recourse liabilities. |
| | D) | Partner guaranteed payments. |
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| 12.
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Alison has a basis of $25,000 in a partnership at the beginning of the year. She receives $12,000 in cash distributions, her distributive share of income is $8,000, and she receives a land distribution with a basis of $16,000 (FMV $24,000). What is Alison's partnership interest basis at the end of the year? |
| | A) | $0. |
| | B) | $1,000. |
| | C) | $5,000. |
| | D) | $21,000. |
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| 13.
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A partner will recognize a gain on a current distribution in which of the following situations? |
| | A) | If a partner receives a land distribution with a basis in excess of the partner's basis. |
| | B) | If a partner is released of a liability in excess of basis. |
| | C) | If a partner is the only partner to receive a cash distribution. |
| | D) | If a partner is the only partner to receive a distribution of marketable securities. |
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| 14.
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Ashley contributes stock to a partnership. The stock has a basis of $12,000 and a FMV of $24,000 in 2005. In 2006, when the FMV of the stock is $30,000, the partnership distributes the stock to Michael, another partner. Which of the following is correct? |
| | A) | Ashley will recognize a gain of $12,000. |
| | B) | Michael will recognize a gain of $18,000. |
| | C) | No gain or loss will be recognized by Ashley. |
| | D) | Michael will have a basis in the stock of $30,000. |
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| 15.
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Which of the following statements is correct concerning liquidating distributions of a partnership: |
| | A) | A loss can never be recognized. |
| | B) | A distribution of money in excess of basis causes a gain to be recognized. |
| | C) | Basis is allocated only to cash, marketable securities, and receivables in a liquidation. |
| | D) | Gain or loss is always recognized with a liquidating distribution. |
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