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Exam 21: Partnerships

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Question 31

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In which of the following independent situations would the transaction most likely be characterized as a disguised sale?

A) Partner George contributes appreciated property to the GMVV Partnership,and three years later GMVV distributes $100,000 proportionately to all the partners.
B) Barbara contributes property with a basis of $20,000 and a fair market value of $50,000 to the BGB Partnership in exchange for a 20% interest therein.The partnership agrees to distribute $20,000 to Barbara in fifteen months,if partnership cash flows from operations exceed $100,000 at that time.The partnership does not expect to produce operating cash flows of over $100,000 for at least five years.
C) Bill contributes appreciated property to the BLP Partnership.Thirty months later,he receives a distribution from the partnership of $15,000 cash.None of the other partners received a distribution.There was no agreement that BLP would make the distribution,and Bill would have made the contribution whether or not the partnership made the distribution.
D) None of the above transactions will be treated as a disguised sale.
E) a. ,b. ,and c.are all treated as disguised sales.

F) A) and B)
G) C) and D)

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Question 32

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Which of the following statements about the transfer of a partnership interest is not true?

A) The seller's adjusted basis for the partnership interest is increased by the seller's share of undistributed partnership income (or reduced by partnership loss) for the portion of the partnership's taxable year ending on the date of the sale.
B) The partnership taxable year generally closes with respect to a partner who transfers a partnership interest at death.
C) The amount realized on the sale of a partnership interest is the sum of any money and the fair market value of any property received for the interest,plus the selling partner's share of partnership liabilities under § 752.
D) With respect to a transfer of a partnership interest by gift,all partnership gain,loss,credit,etc. ,items are allocated to the donor.
E) All of the above are true statements.

F) A) and B)
G) C) and E)

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Question 33

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MEM Partners was formed during the current tax year.It incurred $20,000 of organizational expenses,$100,000 of startup expenses,and $200,000 of syndication costs.Which of the following statements is correct regarding these payments?

Marilyn is a partner in a continuing partnership.At the end of the current year,the partnership makes a proportionate,nonliquidating distribution to Marilyn of $40,000 cash,inventory (basis of $12,000,fair market value of $10,000),and land (basis of $30,000,fair market value of $40,000).Marilyn's basis in the partnership interest was $80,000 before the distribution.What is Marilyn's basis in the inventory,land,and partnership interest following the distribution?

The JIH Partnership distributed the following assets to partner James in a proportionate liquidating distribution in which the partnership is liquidated: $25,000 cash,land parcel A (basis of $5,000,fair market value of $30,000),and land parcel B (basis of $5,000,fair market value of $15,000).James's basis in his partnership interest was $85,000 immediately before the distribution.

Which of the following statements is true regarding the sale of a partnership interest?

Nina and Sue form an equal partnership during the current year.Nina contributes cash of $130,000,and Sue contributes property (adjusted basis of $100,000,fair market value of $250,000)subject to a nonrecourse liability of $120,000.As a result of these transactions,Sue has a basis in her partnership interest of $50,000.

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

Denise invested $30,000 this year to purchase a 20% interest in the DEF Partnership.The partnership reported $100,000 of net income from operations,a $6,000 short-term capital loss,and a $2,000 charitable contribution.In addition,the partnership distributed $10,000 to Denise and $20,000 each to partners Ed and Fran.Assuming the partnership has no beginning or ending liabilities,what is Denise's basis in her partnership interest at the end of the year?

In a proportionate liquidating distribution,Scott receives a distribution of $20,000 cash,accounts receivable (basis of $0 and fair market value of $40,000) ,and land (basis of $30,000 and fair market value of $60,000) .In addition,the partnership repays all liabilities,of which Scott's share was $20,000.Scott's basis in the entity immediately before the distribution was $100,000.As a result of the distribution,what is Scott's basis in the accounts receivable and land,and how much gain or loss does he recognize?

Barney,Bob,and Billie are equal partners in the BBB Partnership.The partnership balance sheet reads as follows on December 31 of the current year: Partner Billie has an adjusted basis of $40,000 for her partnership interest.If Billie sells her entire partnership interest to new partner Janet for $60,000 cash,how much capital gain and ordinary income must Billie recognize from the sale?

Tina sells her 1/3 interest in the TAX Partnership to James for $60,000 cash plus the assumption of Tina's $4,000 share of partnership debt.On the sale date,the partnership balance sheet and agreed-upon fair market values were as follows: As a result of the sale,Tina recognizes:

In computing the ordinary income of a partnership,a deduction is generally allowed for:

Martin has a basis in a partnership interest of $100,000.At the end of the current year,the partnership distributed to Martin,in a proportionate nonliquidating distribution,cash of $10,000,inventory (basis to the partnership of $6,000 and fair market value of $12,000) ,and land (basis to the partnership of $20,000 and fair market value of $15,000) .In addition,Martin's share of partnership debt decreased by $10,000 during the year.What basis does Martin take in the inventory and land and in the partnership interest following the distribution?

Jamie contributed fully depreciated ($0 basis)property valued at $30,000 to the JKLM Partnership in exchange for a 40% interest in partnership capital and profits.During the first year of partnership operations,JKLM had net taxable income of $80,000 and tax-exempt income of $10,000.The partnership distributed $20,000 cash to Jamie.Her share of partnership recourse liabilities on the last day of the partnership year was $13,000.What is Jamie's adjusted basis (outside basis)for her partnership interest at the end of the tax year?

Beth has an outside basis of $60,000 in the BBDE Partnership as of December 31 of the current year.On that date the partnership liquidates and distributes to Beth a proportionate distribution of $20,000 cash and inventory with an inside basis to the partnership of $18,000 and a fair market value of $22,000.In addition,Beth receives a desk (not inventory) which has an inside basis and fair market value of $200 and $350,respectively.None of the distribution is for partnership goodwill.How much gain or loss will Beth recognize on the distribution,and what basis will she take in the desk?

On a partnership's Form 1065,which of the following statements is always true?

The LN partnership reported the following items of income and deduction during the current tax year: revenues,$200,000;cost of goods sold,$80,000;tax-exempt interest income,$5,000;salaries to employees,$50,000;and long-term capital gain,$5,000.In addition,the partnership distributed $10,000 of cash to 50% partner Nina and $20,000 of cash to 50% partner Len.What is Nina's share of ordinary partnership income and separately stated items?

Richard made a contribution of property to the newly formed QRST Partnership.The property had a $30,000 adjusted basis to Richard and a $100,000 fair market value on the contribution date.The property was also encumbered by a $50,000 nonrecourse debt,which was transferred to the partnership on that date.Another partner,Sylvia,shares 1/3 of the partnership income,gain,loss,deduction,and credit.Under IRS regulations,Sylvia's share of the nonrecourse debt for basis purposes is:

Which of the following statements correctly reflects the rules regarding proportionate liquidating distributions?