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Flashcards in R4 - Partnerships Deck (26):

How does a partner recognize gain if he contributes services in exchange for partnership interest?

Ordinary income = % equal to his partnership interest in FMV of partnership's assets


What goes into partner's initial basis?

NBV of property
LESS: liabilities assumed by other partners
FMV of services rendered
Liabilities assumed by the incoming partner


What happens if a partner contributes a property with a FMV not equal to its NBV and later on the partnership sells the asset?

The built-in gain/loss existing at the date of the CONTRIBUTION is specially-allocated to the partner who contributed it


What is partnership's basis in the contributed property?

NBV + any gain recognized by the incoming partner, if that election is made


What are possible partnership tax years?

Calendar or fiscal - 3 month deferral maximum (oct, nov, dec)


What if a partner enters into a transaction with a partnership as an outsider?

F.ex. Buying an asset

If he owns more than 50% - he's a related party in which case:

Loss - disallowed
Gain - ordinary


What is a guaranteed payment?

Distribution to a partner for services or capital provided

WITHOUT regard to partnership income or profit/loss sharing ratio


How are payments to a retired partner treated?

Ordinary income to partner
Deduction to partnership


Are syndication fees deductible?



What happens if a partnership distributes property and partner's basis is less than NBV?

No gain is recognized!!!

Partner gets basis in the asset = basis in the partnership before distribution after cash received, if any
His basis in the partnership becomes $0


In a liquidating distribution how is gain recognized, if any?

Only to the extent of MONEY received

After cash - zero-out to get out


Can a partner recognize a loss on a liquidating distribution?

YES - if he only receives cash, unrealized A/R or inventory


What is the character of gain on sale of partnership interest?

Capital, unless some or all of it is "hot assets"

Unrealized receivables
Appreciated inventory
Recapture income in depreciable assets owned by partnership


If an estate or trust has a capital gain or loss, does it get distributed to the beneficiary?

No - it stays with the trust and is classified as principal absent written provision to the contrary


How is DNI calculated?

Gross income less deductions
ADD: adjusted tax-exempt interest

Capital gains are excluded from calculation


What are estate and trusts allowable deductions?

Carrying on a trade or business
Production of income
Preservation of income producing property
CPA fees
Charitable contributions - unlimited, if such contribution is provided for in the will


What two items are apportioned between principal and income?

Interest (bond amortization - principal, the rest is income)


What is income distribution deduction limitation?

The lesser of:

Actual distribution


What is estate exemption amount?



What are estates and trusts tax years?

Estate - calendar or any fiscal

Trust - calendar ONLY


What are simple trust's features?

Distributions out of income ONLY, not corpus
MUST distribute all of it currently
No charitable contribution deduction

$300 exemption


What are complex trust's features?

May accumulate income
May distribute principal
May deduct charity

$100 exemption


What is an estate tax return?
When it must be filed?
What's the deadline?

Form 706
9 months after death
File only if the gross value of the estate + taxable gifts are over 5,120,000


What goes into estate value?

FMV property owned
Insurance proceeds
Incomplete gifts
Revocable transfers
All property entitled to be received


What are estate non discretionary expenses?

Medical - estate OR 1040 as an option
Administrative - estate OR 1040 as an option
Outstanding debts
Claims against the estate
Funeral costs
Certain taxes


What are estate discretionary expenses

Unlimited charitable and marital deduction