M2-Partnerships: Part 1 Flashcards
A partner’s basis in the partnership is increased by the partner’s share of partnership liabilities. (true or false)
true
Among other events, a partnership terminates for income tax purposes when 50% or more of interest change hands within _______ months.
12 months
When a partnership is terminated for tax purposes and its remaining partners decide to carry on the partnership business in a (deemed) new partnership, tax law treats this as a distribution of the prior partnership’s assets followed by a re-contribution of the (deemed) distributed assets to the new partnership. (true or false)
true
A partner’s basis is increased by the partner’s share of partnership ordinary income, separately stated income, and tax exempt income. (true or false)
true
Generally, no gain or loss is recognized on the contribution of property to a partnership in return for partnership interest. The basis of the partnership interest is the basis of the property in the hands of the partner upon contribution. The partnership take on the contributors basis of the contributed property; however, i the FMV of the property differs from the basis, the amount of the unrealized gain or loss at the date of contribution is specially-allocated to whom?
The contributing partner upon the sale of that contributed property.
If a person receives an interest in the capital of a partnership as a result of prior employment service, the FMV of the interest acquired represents ordinary income to the recipient and is his basis in the partnership interest acquired. (true or false)
true
A partnership may elect to have a tax year other than the generally required tax year if the deferral period for the tax year elected does not exceed three months. (true or false)
true
The holding period of a partnership interest acquired in exchange for a contributed capital asset begins on the date the partner’s holding period of the capital asset began. (true or false)
true
Per IRC Section 706 (b), a partnership tax year must have the same taxable year as the common taxable year of the partners that, in the aggregate, have interest greater than _____%, which is determined based on the “testing day”, the first day of the partnership’s tax year (not considering the majority interest rule).
50%
Note: After a change is made to the “majority-interest” tax year end, the partnership does not have to change to another tax year for two years following the year of change.
Exceptions to the rule exist.
1) If there is no “majority interest” tax year, then the tax year is the tax year of all of the principal partners of the partnership (those owning 5% or more of the income or capital of the partnership)
2) If the partnership is still unable to determine a tax year using the general rule or the first exception, then the tax year that causes the least aggregate deferral of income to the partners musts be adopted.
The general rule is that the partnership’s basis in the contributed property is the carryover basis of the contributor. (true or false)
true
