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Multiple Choice Quiz
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1
If cash and property are both contributed on the formation of a partnership, outside basis will never equal inside basis.
A)True
B)False
2
If Sally contributes a personal use van to a partnership with a basis of $22,000 and a FMV of $16,000, the partnership will have a basis in the asset of $16,000.
A)True
B)False
3
Ordinary income includes capital gain income received by the partnership.
A)True
B)False
4
Guaranteed payments are treated as both ordinary and as separately stated items.
A)True
B)False
5
Partners are not required to pay self-employment tax on their share of partnership ordinary income.
A)True
B)False
6
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.
7
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.
8
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.
9
Randle has a Schedule C with the following assets:
   Basis   FMV
Cash   $9,000  $9,000
A/R            0  20,000
Building190,000125,000
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.
10
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.
11
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.
12
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.
13
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.
14
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.
15
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.
16
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.
17
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.
18
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.
19
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.
20
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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