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1
A partner that contributes services to a partnership in exchange for a partnership interest never recognizes a gain.
A)True
B)False
2
If only cash is contributed on the formation of a partnership, the partnership beginning basis will be equal to the amount of cash.
A)True
B)False
3
The term "step-into-the-shoes" means that the partnership continues the same depreciation period and method for any depreciable asset contributed to the partnership.
A)True
B)False
4
Partnership ordinary income includes capital gains and rental income received by the partnership.
A)True
B)False
5
Guaranteed payments are deductible from partnership ordinary income.
A)True
B)False
6
All separately stated items from a partnership are considered self-employment income.
A)True
B)False
7
Tax-exempt income from a partnership increase a partner's basis in the partnership interest.
A)True
B)False
8
A partner's share of qualified non-recourse liabilities increases the partner's basis in his or her partnership interest.
A)True
B)False
9
When only cash is received in a current distribution from a partnership, a partner never recognizes a gain.
A)True
B)False
10
A loss is never recognized on the liquidation of a partner's interest.
A)True
B)False
11
Beaman performs services in exchange for a 5% interest in a manufacturing partnership. The services were worth $5,000. From this transaction, Beaman will have the following tax implications:
A)No tax implications.
B)Taxable income of $5,000 and a partnership interest with a basis of $0.
C)Zero taxable income and a partnership interest with a basis of $5,000
D)$5,000 of taxable income and a partnership interest with a basis of $5,000.
12
Allie contributed the following business assets to ASW Partnership on August 1, 2007:
 Basis   FMV    Date Purchased by Allie
Building $175,000   $300,00007/01/94
Inventory$ 50,000   $100,00005/08/04
What is the basis in the inventory and the building to ASW?
A)Building $0; Inventory $ 0.
B)Building $175,000; Inventory $ 50,000.
C)Building $175,000; Inventory $100,000.
D)Building $300,000; Inventory $100,000.
13
Nathan contributes equipment with a FMV of $15,000 and a basis of $0 to a partnership in return for a 10% partnership interest in NFG partnership. Nathan must recognize a gain of:
A)$0.
B)$1,500.
C)$15,000.
D)Cannot be determined.
14
The holding period to the partnership for a building contributed to the partnership begins:
A)On the date of the contribution to the partnership.
B)On the date the partnership puts the building into use in partnership operations.
C)On the date the partner purchased the building and includes the length of time he or she held the building.
D)None of the above.
15
All of the following are considered ordinary items to a partnership except:
A)Gross Profit.
B)Salary and Wages.
C)Taxes and Licenses.
D)Capital Gains and Losses.
16
Ordinary expenses to a partnership include:
A)All amounts paid by the partnership.
B)All ordinary and necessary expenses paid by the partnership that can be treated differently at the partner level.
C)All ordinary and necessary expenses paid by the partnership that cannot be treated differently at the partner level..
D)None of the above.
17
Stan is a partner in STR partnership. Stan owned 10% from January 1, 2007 to March 31, 2007, when he bought Rick's 30% interest. He owed 40% for the rest of the year. The partnership had ordinary income of $130,000 and $23,000 in long-term capital losses. Stan's share of ordinary income for the year is:
A)$ 34,775.
B)$ 42,280.
C)$107,000.
D)$130,000.
18
All of the below items from a partnership go into the calculation of a partner's self-employment income except:
A)Share of ordinary income.
B)Dividend income.
C)Guaranteed payment.
D)Section 179 expense.
19
Separately stated items to a partnership include:
A)All amounts paid by the partnership.
B)All ordinary and necessary expenses paid by the partnership that can be treated differently at the partner level.
C)All ordinary and necessary expenses paid by the partnership that cannot be treated differently at the partner level..
D)All income and expense items of a partnership that may be treated differently at the partner level.
20
Which of the following is not a separately stated item to a partnership?
A)Rental income.
B)Royalty income.
C)Sales of inventory.
D)Dividends.
21
Julianna and Dennis are equal partners in a partnership. When forming the partnership, Dennis contributed a building with an FMV of $250,000 and a basis of $150,000. During the first year of operations, the partnership earned $70,000 in ordinary income and tax-exempt interest of $1,200. Assuming no special allocations, Dennis's basis in the partnership interest at the end of the year is:
A)$0.
B)$150,000.
C)$185,600.
D)$221,200.
22
Which of the following items do not reduce a partner's basis in his or hers partnership interest:
A)Nondeductible expenses.
B)Guaranteed payments.
C)Capital losses.
D)Property distributions.
23
Partner Al has a basis of $10,000 in a partnership at the beginning of the year. He receives $6,000 in cash distributions, his distributive share of income is $5,000, and he receives a land distribution with a basis of $8,000 (FMV $20,000). What is Al's ending basis in the partnership?
A)$0.
B)$(11,000).
C)$1,000.
D)$9,000.
24
When a partner receives a current distribution from a partnership, he or she will recognize a gain in which of the following situations:
A)Only when the basis of the property received exceeds the partner's basis.
B)When money or marketable securities are received in excess of the partner's basis.
C)When the FMV of property and cash exceed the partner's basis.
D)A partner never recognizes a gain on a current distribution.
25
A pre-contribution gain is recognized when:
A)A partner contributes appreciated property to partnership and within seven years the same property is distributed to another partner.
B)The partnership sells contributed appreciated property within seven years of the property's contribution.
C)A partner contributes appreciated property to partnership and within seven years the same property distributed back to the same partner.
D)None of the above.
26
Wendy contributes land to a partnership with a basis of $24,000 and an FMV of $36,000 in 2005. In 2007, when the FMV of the land is $38,000, the partnership distributes the land to Calvin, another partner. Which of the following is true?
A)Wendy recognizes no gain or loss.
B)Calvin recognizes a gain of $14,000.
C)Wendy recognizes a gain of $12,000.
D)Calvin has a basis of $38,000 in the land.
27
Partner Sid has a basis of $12,000 in a partnership at the beginning of the year. He receives $10,000 in cash distributions, his distributive share of income is $3,000, and he receives a land distribution with a basis of $7,000 (FMV $15,000). What is Sid's basis in the land?
A)$0.
B)$5,000.
C)$7,000.
D)$ 15,000.
28
When a partnership makes a liquidating distribution, a loss can be recognized by the partners in which of the following situations:
A)When the amounts received by the partner are less than the partner’s outside basis and only property is received.
B)When the amounts received by the partner are less than the partner’s outside basis and only money, receivables, and/or inventory is distributed.
C)When the amounts received by the partner are less than the partner’s outside basis and only property (equipment & buildings) and money are received.
D)A loss can never be recognized with a liquidating distribution.
29
Sarah has a basis in her partnership interest of $20,000. She receives the following assets in complete liquidation of the partnership interest:
Cash$6,000
Inventory (Basis)$4,000
Equipment (Basis)$4,000
Land (Basis)$8,000
What is Sarah recognized gain or loss on the liquidating distribution?
A)$0 gain or loss.
B)$2,000 gain.
C)$2,000 loss.
D)$12,000 gain
30
Sarah has a basis in her partnership interest of $20,000. She receives the following assets in complete liquidation of the partnership interest:
Cash$6,000
Inventory (Basis)$4,000
Equipment (Basis)$4,000
Land (Basis)$8,000
What is Sarah basis in the equipment and land?
A)$ 0 basis in the equipment; $0 basis in the land.
B)$4,000 basis in the equipment; $6,000 basis in the land
C)$3,333 basis in the equipment; $6,667 basis in the land
D)$4,000 basis in the equipment; $8,000 basis in the land.





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