Prentice-hall's-federal-taxation-test-bank-chapter-9

1、精品好資料學(xué)習(xí)推薦Prentice Halls Federal Taxation 2013 Corporations, 26e (Pope)Chapter C9 Partnership Formation and Operation1) Formation of a partnership requires legal documentation filed with the Secretary of State.Answer: FALSEPage Ref.: C:9-2Objective: 12) A partners basis for his partnership interest c

2、an be negative.Answer: FALSEPage Ref.: C:9-5Objective: 13) The holding period of a partnership interest acquired in exchange for a contributed capital asset begins on the date the partner transfers the asset to the partnership.Answer: FALSEPage Ref.: C:9-8Objective: 34) A partnership cannot make cha

3、ritable contributions.Answer: FALSEPage Ref.: C:9-16Objective: 25) ABC Partnership distributes $12,000 to partner Al. Als distributive share of partnership income is $20,000. Al is taxed on $20,000.Answer: TRUEPage Ref.: C:9-17Objective: 66) A partners distributive share is the partners share of any

4、 assets distributed by the partnership.Answer: FALSEPage Ref.: C:9-17Objective: 67) A partners share of nonrecourse debt increases that partners share of basis.Answer: TRUEPage Ref.: C:9-22Objective: 78) A partners basis for his or her partnership interest is increased by his share of the partnershi

5、ps tax-exempt income.Answer: TRUEPage Ref.: C:9-24Objective: 79) Limited partners must consider the at-risk, basis, and passive loss limitations when determining the amount of their deductible loss.Answer: TRUEPage Ref.: C:9-26 and C:9-27Objective: 810) No gain is recognized on the sale of property

6、between a partnership and a more-than-50% partner.Answer: FALSEPage Ref.: C:9-28Objective: 811) Guaranteed payments are always ordinary income to the recipient.Answer: TRUEPage Ref.: C:9-28Objective: 912) A partnership must file Form 1065 only if its income exceeds $1,000.Answer: FALSEPage Ref.: C:9

7、-32Objective: 1213) Identify which of the following statements is true.A) Formation of a partnership requires legal documentation.B) An individual engaged in the active conduct of a business must elect not to be taxed as a partnership.C) A partnership exists as long as there are at least two individ

8、uals or entities engaged in the active conduct of a trade or business or a financial operation, and the business is not a trust or a corporation.D) All of the above are false.Answer: CPage Ref.: C:9-2Objective: 114) The definition of a partnership does not includeA) a syndicate.B) a group.C) a pool.

9、D) All of the above are included.Answer: DPage Ref.: C:9-2Objective: 115) Identify which of the following statements is true.A) All of the partners in a limited partnership have limited liability.B) A limited partnership must have at least two general partners.C) A limited partnership cannot have a

10、corporate general partner.D) All of the above are false.Answer: DPage Ref.: C:9-3Objective: 116) Which of the following is false?A) A large partnership must not be a service partnership.B) A large partnership must have fewer than 100 partners.C) A large partnership must not be engaged in commodity t

11、rading.D) A large partnership is subject to a different system of audits.Answer: BPage Ref.: C:9-4Objective: 117) Electing large partnership rules differ from other partnership rules in all of the following areas exceptA) partnership income reporting.B) partnership termination.C) partnership audits.

12、D) All of the above are large partnership rule differences.Answer: DPage Ref.: C:9-4Objective: 118) On the first day of the partnerships tax year, Karen purchases a 50% interest in a general partnership for $30,000 cash and she materially participates in the operation of the partnership for the enti

13、re year. The partnership has $40,000 in recourse liabilities when Karen enters the partnership. Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses. There is no minimum gain related to the nonrecourse liability. During the year, the partne

14、rship incurs a $120,000 loss and a $20,000 increase in liabilities. How much of the loss can Karen report on her tax return for the current year?A) $30,000B) $40,000C) $50,000D) $60,000Answer: DExplanation: D) Beginning basis$30,000Plus: 50% of beginning-of-year liabilities 50% of increase in liabil

15、ities20,00010,000Karens Sec. 704(d) basis$60,000Karens at-risk basis$60,00050% of partnership loss ($120,000 0.50)$60,000The loss is deductible only to the extent of Karens at-risk basis, or $50,000.Page Ref.: C:9-5; Example C:9-3Objective: 119) Identify which of the following statements is true.A)

16、Distribution of partnership income in the form of cash to partners is generally tax-free to the partners and the partnership.B) When partners receive cash distributions from the partnership, they pay taxes on those distributions.C) If money distributions exceed the partners basis in the partnership

17、interest, the partner would have to recognize gain on the distribution from the partnership. Such gain is usually an ordinary gain.D) All of the above are true.Answer: APage Ref.: C:9-5Objective: 120) George pays $10,000 for a 20% interest in a general partnership, which has recourse liabilities of

18、$20,000. The partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses. Georges basis in his partnership interest isA) $10,000.B) $12,000.C) $14,000.D) $30,000.Answer: CExplanation: C) Beginning basis$10,000Plus: 20% of liabilities4,000 Georges

19、basis$14,000 Page Ref.: C:9-5; Example C:9-1Objective: 121) On January 1, Helmut pays $2,000 for a 10% capital, profits, and loss interest in a partnership, which has recourse liabilities of $20,000. The partners share economic risk of loss from recourse liabilities in the same way they share partne

20、rship losses. In the same year, the partnership incurs losses of $6,000 and the recourse liabilities increase by $5,000. Helmut and the partnership use a calendar tax year-end. Helmuts basis at year-end isA) $1,500.B) $2,000.C) $3,500.D) $3,900.Answer: DExplanation: D) Beginning basis$2,000Plus: 10%

21、 of January 1 liabilities2,000Plus: 10% of increase in liabilities500Minus: 10% of loss passthrough( 600)Basis at end of the year$3,900Page Ref.: C:9-5; Example C:9-2Objective: 122) Identify which of the following statements is true.A) A contribution of services for a partnership interest is a tax-f

22、ree transaction.B) For federal income tax purposes, formation of a partnership is governed by Sec. 721.C) When a partnership assumes a liability on property contributed by a partner, the only effect on the contributing partners basis in his or her partnership interest is that his or her basis will b

23、e increased by the amount of the liability assumed by the other partners.D) All of the above are false.Answer: BPage Ref.: C:9-6 and C:9-7Objective: 223) Yong contributes a machine having an adjusted basis of $20,000 and an FMV of $25,000 for a 10% partnership interest. Yong had taken $10,000 of dep

24、reciation prior to the contribution. The partnership has no liabilities. As a result of the contribution, Yong must recognizeA) no gain or loss.B) a $5,000 Sec. 1245 gain.C) a $5,000 capital gain.D) $10,000 ordinary income.Answer: AExplanation: A) No gain or loss is recognized at the time of the con

25、tribution.Page Ref.: C:9-6 and C:9-7Objective: 324) Identify which of the following statements is true.A) A partners relief of debt is treated as if the partner receives a cash distribution.B) When a partnership assumes any liabilities of the transferor, the transferor has an increase in the basis o

26、f his or her partnership interest.C) Gain recognized by a contributing partner because of the assumption of liabilities by the partnership increases the partnerships basis in the contributed property.D) All of the above are false.Answer: APage Ref.: C:9-6 and C:9-7Objective: 325) For a 20% interest

27、in partnership capital, profits, and losses, Kasi contributes a machine having a basis of $30,000 and an FMV of $40,000. The partnership also assumes a $24,000 recourse liability secured by the machine. The partnership has $6,000 in recourse liabilities immediately preceding Kasis contributions. Par

28、tners share the economic risk of loss from recourse liabilities in the same way they share partnership losses. Kasis basis in the partnership interest isA) $10,800.B) $12,000.C) $13,200.D) $30,000.Answer: BExplanation: B) Beginning basis (machine basis)$30,000 Minus: liability assumed by other partn

29、ers(19,200)Plus: 20% of other partnership liabilities1,200 Kasis basis$12,000 Page Ref.: C:9-7; Example C:9-6Objective: 326) For a 30% interest in partnership capital, profits, and losses, Carol contributes a machine with a basis of $40,000 and an FMV of $80,000. The partnership assumes a $70,000 re

30、course liability on the machine. At the time of the contribution, the partnership had recourse liabilities of $10,000. Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses. Following the contribution, Carol hasA) a capital loss due to the c

31、ontribution of $6,000 and a zero basis in the partnership interest.B) a capital gain due to the contribution of $6,000 and a zero basis in the partnership interest.C) a $34,000 basis in the partnership interest and no gain or loss.D) a $43,000 basis in the partnership interest and no gain or loss.An

32、swer: BExplanation: B) Beginning basis (carryover from machinery)$40,000 Minus: liability assumed by other partners(49,000)Plus: liability assumed by Carol3,000 Tentative partnership interest basis($ 6,000)Capital gain recognized by Carol$ 6,000 Basis: larger of -0- or ($6,000)$ -0- Page Ref.: C:9-7

33、; Example C:9-7Objective: 327) Stella acquired a 25% interest in the STUV Partnership by contributing land having an adjusted basis of $32,000 and a fair market value of $100,000. The land was subject to a $48,000 mortgage, which was assumed by STUV. No other liabilities existed at the time of contr

34、ibution. What is Stellas basis in her partnership interest?A) $0B) $32,000C) $52,000D) $64,000Answer: APage Ref.: C:9-7; Example C:9-7Objective: 328) David contributes investment land with a basis of $24,000 and an FMV of $40,000 to a partnership for a 10% interest in partnership capital, profits, a

35、nd losses. The land is subject to a $30,000 recourse liability, which is assumed by the partnership. The partnership has other recourse liabilities of $18,000. Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses. David must recognize aA) $

36、3,000 capital gain.B) $3,000 capital loss.C) $1,200 capital gain.D) $1,200 capital loss.Answer: CExplanation: C) Beginning basis (carryover from land)$24,000 Minus: liability assumed by other partners(27,000)Plus: liability assumed by David1,800 Tentative basis for partnership interest($1,200)Capita

37、l gain recognized by David$ 1,200 Page Ref.: C:9-7; Example C:9-7Objective: 329) Rashad contributes a machine having a basis of $30,000 and an FMV of $25,000 to a partnership in exchange for a 20% interest in partnership capital, profits, and losses. Prior to the contribution, the partnership had re

38、course liabilities of $20,000. The partnership assumes a $20,000 recourse liability that is owed by Rashad on the machine. Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses. Rashads basis in his partnership interest isA) $11,000.B) $18,0

39、00.C) $22,000.D) $34,000.Answer: BExplanation: B) Beginning basis (carryover from machine)$30,000Plus: share of partnership liabilities4,000 Minus: liabilities assumed by others partners(16,000)Rashads basis$18,000 Page Ref.: C:9-7Objective: 330) Albert contributes a Sec. 1231 asset to a partnership

40、 on June 1 of this year in exchange for a 10% partnership interest. He had purchased the asset on March 1, 2002. His holding period for the partnership interest beginsA) March 1, 2002.B) March 2, 2002.C) June 1 of the current year.D) June 2 of the current year.Answer: APage Ref.: C:9-8Objective: 331

41、) Mario contributes inventory to a partnership on August 1 of this year in exchange for a 20% partnership interest. Mario had purchased the inventory on July 2 of last year. His holding period for the partnership interest beginsA) July 2 of last year.B) July 3 of last year.C) August 1 of the current

42、 year.D) August 2 of the current year.Answer: DPage Ref.: C:9-8Objective: 332) Allen contributed land, which was being held for sale to Allens customers, to a partnership in exchange for a 20% interest. The partnership uses the land in its business for three years and then sells the property. When t

43、he property was contributed, it had a basis in Allens hands of $500,000 and an FMV of $600,000. The partnership sells the land for $700,000. The gain reported by the partnership isA) $100,000 of ordinary income and $100,000 of Sec. 1231 gain.B) $100,000 of Sec. 1231 gain and $100,000 of capital gain

44、.C) $200,000 of ordinary income.D) $200,000 of Sec. 1231 gain.Answer: CExplanation: C) Amount realized$700,000Minus: adjusted basis(500,000)Ordinary income$200,000 Land, which is held as inventory by Allen, retains its character as inventory in the hands of the partnership for five years after the c

45、ontribution.Page Ref.: C:9-8 and C:9-9Objective: 333) Bao had investment land that he purchased in 1990 for $80,000. Two years ago, when the land was contributed to a partnership, the FMV was $50,000. The land is inventory in the hands of the partnership. The partnership then sells the land in the c

46、urrent year for $46,000. The partnerships recognized loss isA) a $34,000 capital loss.B) a $34,000 ordinary loss.C) a $30,000 capital loss and a $4,000 ordinary loss.D) a $4,000 capital loss and a $30,000 ordinary loss.Answer: CExplanation: C) The $30,000 precontribution loss retains its character a

47、s a capital loss, but the loss accrued since the contribution date is ordinary loss.Page Ref.: C:9-9Objective: 334) Karl arranges financing for a limited partnership to purchase real estate in exchange for a 50% interest in partnership profits. Two weeks later, Karl sells the profits interest for $3

48、0,000. In this tax year, Karl must recognizeA) no gain or loss.B) a $30,000 short-term capital gain.C) a $30,000 ordinary income.D) a $30,000 Sec. 1231 gain.Answer: CPage Ref.: C:9-10; Example C:9-12Objective: 335) Identify which of the following statements is true.A) The contribution of Sec. 1245 p

49、roperty to a partnership triggers recognition of ordinary income by the contributor at the time of the transfer.B) A partner may not recognize ordinary income when receiving a capital and profits interest in a partnership in exchange for services.C) When a partnership interest is given to a partner

50、in exchange for services, the partnership can deduct or capitalize the FMV of the services, depending on the nature of the services.D) All of the above are false.Answer: CPage Ref.: C:9-11Objective: 336) Ali, a contractor, builds an office building for a construction partnership in exchange for a ca

51、pital and profits interest in the partnership worth $500,000. Which of the following statements is correct?A) Ali recognizes $500,000 of ordinary income and the partnership can deduct $500,000 in the current year.B) Ali recognizes no income and the partnership can deduct nothing in the current year.

52、C) Ali recognizes $500,000 ordinary income and the partnership deducts the $500,000 over the buildings MACRS recovery period as a depreciation expense.D) Ali recognizes ordinary income in the current year in an amount equal to the depreciation deduction the partnership claims this year for the $500,

53、000 capitalized amount.Answer: CPage Ref.: C:9-11; Example C:9-14Objective: 337) Bob, Kara, and Mark are partners in the BKM Partnership. Bob is a 40% partner and has a June 30 tax year-end. Kara owns a 40% interest in the partnership and has a September 30 tax year-end, and Mark owns the remaining

54、20% interest and has an October 31 tax year-end. The partnership does not have a natural business year. What is the required tax year-end for the partnership (if no Sec. 444 election is made)?A) June 30B) September 30C) October 31D) December 31Answer: AExplanation: A) The least aggregate deferral fo

55、r the alternative tax year-ends is:June 302.0September 303.8October 317.6December 318.0The smallest of the four alternatives is June 30.Page Ref.: C:9-12 through C:9-14; Example C:9-17Objective: 438) Identify which of the following statements is true.A) The Fisher Partnership is owned equally by fou

56、r individual partners. Two of the partners have fiscal years ending March 31 and two partners have fiscal years ending June 30. The partnership has a natural business year. The partnership must adopt a calendar year for tax reporting purposes unless a Sec. 444 election is made.B) Partnerships make most of the tax elections for the partnership rather than the partners.C) A partner can elect the depreciation method to be applied to the partners share of the partnerships depreciable assets.D) All of the above are false.Answer: BPage Ref.: C:9-15Ob