Chapter 9 - Contributions to a Partnership

Question 1

What is a joint venture of a partnership? What are the benefits?

Answer 1

1) Spouses filing a joint return may elect out of a partnership treatment by a qualifying joint venture

Benefits: Each Spouse will be treated as a sole proprietor and allowing both receive society security benefits.

Question 2

When a partner assumes a liability?

Answer 2

It is treated as receiving a distribution of money, and/or it reduces the partner’s basis of the partnership.

Question 3

When the liabilities assumed by the partnership exceed AB of all property contributed, then

Answer 3

the partner recognizes a gain, but partnership’s basis is zero.

Question 4

Cash basis partnership liabilities are included when:

Answer 4

1) Creates or increases the partnership’s basis in its assets

2) Gives rise to a current deduction

3) Gives rise to a nondeductible, noncapital expenses of the partnership

Question 5

A partnership includes a liability only to the extent that

Answer 5

the partner bears the economic risk of loss

Question 6

Holding period of contributed capital and Sec 1231

Answer 6

Begins day after the exchange

Question 7

What is Sec 754?

Answer 7

The partnership may elect to adjust the basis in its assets by the difference between the transferee’s basis in his or her partnership interest and his or her proportionate share of the partnership’s AB in its assets.