REG mod 25b Flashcards
Does each partner in a partnership owe a fiduciary duty to all other partners?
Yes
Describe the treatment of Guaranteed Payments.
Guaranteed payments represent income to the partners and are a deductible expense for the partnership.
What is the requirement related to the name of a Limited Liability Partnership?
The name of the company must indicate that it is a Limited Liability Partnership.
When is an entity required to use the mid-quarter convention?
The mid-quarter convention is required if more than 40% of the personal property is placed in service during the last quarter the year.
What is the most significant difference between a partnership and a joint venture?
A joint venture is organized for the purpose of a single business transaction (or a series of related business transactions). A partnership is ongoing business.
The death of the one and only general partner in a limited partnership results is the dissolution of the limited partnership. True / False
True – limited partnerships are required to have at least one general partner
What is the most significant difference between an S corporation and a C corporation?
The way in which the corporations are taxed. The S corporation is a flow-through entity and all of the income flows through to the owners and are taxed on the individual level. C Corporations are taxed as a separate entity.
What rights are transferred when a partner assigns his partnership interest to a third party?
The right to the partner’s share of the profit.
A partnership must file with the state in which it does business in order to be legally formed. True / False
False. A partnership does not have to file with the state.
What requirements must be met in order for a parent corporation to consolidate with a subsidiary corporation?
The parent must own 80% or more of the subsidiary and have at least 80% of the voting rights related to the subsidiary.
What is the difference between a consolidation and a merger?
The results are different. A consolidation results in a single new entity being formed, whereas a merger results in one entity absorbing another entity.
How does a corporation become a de facto corporation?
By improperly filing the paperwork with the state to create the corporation. The result is the corporation existing by fact; however the corporation is not properly formed under the state law.
What is the alternate method of calculating a partner’s basis?
Capital Account + Recourse Debt = Partner’s basis
The members of the board of directors owe a fiduciary duty to the corporation. True / False
True. The officers of a corporation also owe a fiduciary duty to the corporation.
A partner contributes property to a partnership in exchange for an interest in the partnership. In general, what is the basis of the partnership interest?
Generally, the basis of the partnership interest is the basis of the property contributed. Note: the exception is if the property contributed has a liability attached to it that is greater than the basis of the property. This results in a capital gain.
