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Flashcards in Mod 37 Wrong Answers Deck (47)
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1
Q

If you receive a 10% capital interest in XYZ partnership on the date you were admitted to the partnership, XYZ’s net assets had a basis of $40,000 and a FMV of $80,000.

X must recognize compensation income of…
And has a basis of?

A

Compensation income = $8,000

Basis = $8,000

2
Q

How do you calculate gain when partner contributes property with a mortgage?

A

Gain =
Portion of mortgage allocated to other partners
- adj. basis of contributed property

3
Q

How do you calculate partner’s basis when partner contributes property with a mortgage?

A

Adjusted basis of contributed property
- portion of mortgage allocated to other partners
= partner’s basis

4
Q

What is the principal business activity of a restaurant?

A

Food service

5
Q

What is the principal product of service of a restaurant?

A

Food and drinks

6
Q

Where are salaries and wages reported on form 1065? 2

A

line 1b

Line 1c

7
Q

If there is $50,000 in depreciation expense and the company elects to expense $25,000 of cost of the Sec. 179 assets, where depreciation includes 179 expense deduction. Depreciation expense is…

A

$25,000 ($50,000 - $25,000)

8
Q

In line 21 of form 1065, you should…

A

Add the total deductions

9
Q

When dividends of $1,500 are given for a tax return, they are considered…

A

Both qualified and ordinary dividends

10
Q

The section 179 deduction on schedule K goes on…

A

Line 12

11
Q

Tax exempt interest income, where does it go on schedule K?

A

Line 18a

12
Q

Distributions of cash and other marketable securities, where does it go on Schedule K?

A

Line 19a

13
Q

On schedule, K-1 a partnership in Florida is…

A

Considered a domestic partnership (so check H)

14
Q

For schedule K-1, when it asks what type of entity is this partner, it is?

A

Individual (line I1)

15
Q

On schedule K-1, when it asks for the partner’s share or profit, loss or capital, and it is an equal partner of 50%, you should…

A

1 List 50% for profit, loss and capital

2 Under “Ending” (line J)

16
Q

Recourse debt on schedule K-1 is…

A

Multiplied by the partner’s interest

17
Q

Under L, of schedule K-1 you should check…

A

Tax Basis

18
Q

On schedule K-1 you should list partner’s beginning…

A

Capital account

19
Q

Ordinary income on schedule K-1 is calculated by…

A

Multiplying ordinary income on schedule K by the partner’s %

20
Q

For tax exempt income and Nondeductible expenses, what goes below line 18…

A

“A”

21
Q

For distributions what goes below line 19?

A

“A”

22
Q

% of ordinary income is added to guaranteed payments where on schedule K-1?

2) what goes next to it?

A

Line 14 self employment earnings (first line)

2) “A”

23
Q

What goes in the second part of line 14 self employed earnings?

2) what does next to this item?

A

(Gross income - guaranteed payments) X partner’s % interest

2) “C”

24
Q

On line L, the current year increase is calculated by adding all of the year’s income and subtracting 3

A

1 short term capital loss

2 sec. 179 deduction

3 other deductions

25
Q

On schedule K-1, the lines that should be filled out are…4

A

1 beginning capital account
2 current year increase
3 withdrawals and distributions
4 ending capital account

26
Q

Up to the amount of basis, when there is a distribution can…

2) example

A

Deduct as ordinary income

Ex. 5,000 basis, $6,000 loss and $300 capital gain
$5,300 can be deducted as ordinary loss

27
Q

The deductibility of partnership losses is limited to amount of partner’s at risk basis and will also be subject to…

A

Passive activity loss limitations (if applicable)

28
Q

At risk and passive activity loss limitations apply at…

2) rather than…

A

Apply at partner level

2) rather than partnership level

29
Q

In computing the partnership ordinary income, charitable deductions…

A

Cannot be deducted

30
Q

When a partnership has taxable income of $80,000 in 2013, how much taxable income does a cash basis partner pay when they receive $40,000 in 2013 and $40,000 in 2014?

A

$80,000, doesn’t matter if distributed

31
Q

If stock contributed by an equal partner is sold by the partnership, the equal partner…

A

Pays the entire capital gain

32
Q

If a partnership had $20,000 in ordinary income in fiscal year June 30th, 2013 and $40,000 in ordinary income in fiscal year June 30th, 2014. How much ordinary income would a 60% cash basis partner report for 2013 calendar year return?

A

$10,000 = ($20,000 X 60% interest)

33
Q

In a family partnership, services performed by family members must first…

A

Be reasonably compensated before income is allocated

34
Q

A decrease in a partner’s share of partnership liabilities is deemed to be…2

A

1 distribution of money and

2 reduces partner’s basis of partnership interest

35
Q

A partnership will be terminated when…3

A

1 there are no longer at least 2 partners

2 no part of operating in partnership carried on by any partners

3 within 12 months sale of over 50% interest

36
Q

Although the sale of a partnership interest generally results in capital gain or loss, ordinary income must be recognized to the extent of the selling partner’s…2

A

1 Share of unrealized receivables and

2 appreciated inventory

37
Q

In a nonliquidating partnership distribution, a gain or loss is…

A

Generally not recognized

38
Q

In a nonliquidating partnership distribution, the basis of property distributed to a partner is…

A

Generally the same as partnership’s former basis for property

39
Q

Transferred basis

A

Partnership’s former basis for property

40
Q

If partnership property with a basis of $7,000 is distributed to a partner who’s basis in the partnership is $6,000, the property’s basis…

A

Will be limited to $6,000

41
Q

The distributed basis of partnership property, distributed to a partner is…

A

Limited to that partner’s basis

42
Q

In determining the basis for land received in a nonliquidating partnership distribution, if both cash and noncash property are received in a single distribution. The basis of the partnership interest is…2

A

1 first reduced by cash

2 the remaining basis is allocated to the land

43
Q

In a nonliquidating distribution loss will

A

Not be recognized

44
Q

In a nonliquidating distribution gain will be recognized only if…

A

Cash received exceeds basis for partner’s partnership interest

45
Q

In a liquidating distribution the basis for partnership interest is first reduced by the amount of money received, it is then reduced by…

A

Partnership’s basis for any unrealized receivables and inventory
Received

46
Q

In a liquidating distribution the basis for partnership interest received after being reduced by money, inventory and unrealized receivables, any remaining basis for partnership interest allocated to…

A

Other property received in proportion to adjusted bases (not FV)

47
Q

In a complete liquidation when only money and inventory is received, loss can be calculated by…

A

Subtracting money and basis of inventory from partner’s basis

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