M3-Partnerships: Part 2 Flashcards
A partner does not ordinarily recognize income on a nonliquidating partnership distribution of property other than money. (true or false)
true
Eligible expenditures up to $______ can be deducted in the first year (with overall limitations) Additional expenditures are amortized over _________ months beginning the date they began the business.
$5000
180 months
Legal fees to prepare the partnership agreement are eligible for this treatment
but accounting fees to prepare the representations in offering materials is a sales and promotional expense and is not deductible or amortizable.
A partner who receives a distribution of non-cash property from a partnership takes the partnership’s basis as his basis, but in no case an amount greater than his basis in his partnership interest. (true or false)
true
Partnership income is taxable to a partner whether or not it is distributed. (true or false)
true
Partners are taxed on their share of partnership income whether distributed or not. Partners are taxed on their share of partnership income, not distributions. (true or false)
true
Under entity theory, the partnership elects the depreciation method to be used and may use any method approved by the IRS. (true or false)
true
The method need not be the same as that used by the principal partner.
Sec. 444 permits a partnership to elect a tax year different from the required tax year if the deferral period (i.e., the number of months between the beginning of the tax year and the end of the required tax year) is ____months or less.
3 months
Guaranteed payments to partners are deductible in arriving at the partnership’s ordinary income. (true or false)
True
Ordinary income is the “taxable income” of the partnership excluding all items required to be separately-stated.
Charitable contributions, dividend income, and capital losses are all separately stated items.
When a partner’s share of partnership liabilities increase, what happens to the partner’s basis in the partnership?
That partner’s basis in the partnership increases by his share of the increase. Since the partner has unlimited liability, the partnership liabilities are treated as if the partner personally borrowed the money and then contributed it to the partnership.
A partner’s tax deduction for his or her distributive share of partnership losses is limited to the partner’s adjusted basis in the partnership, which is increased by any partnership liabilities that he or she is personally liable for (called the ________ provision)?
At-risk
Any unused loss can be carried forward and used in a future year when basis becomes available; therefore, the at-risk limitation does not limit a partner’s net operating loss carryover.
Most elections that affect the calculation of taxable income of a partnership are made by the partnership itself rather than by an individual partner. For example, the elections as to methods of accounting, methods of depreciation and the section 179 expensing of a limited amount of depreciable property, the election not to use installment method accounting, and similar elections are made by the partnership and apply to all partners. However individual partners can make the election to take what?
to take a deduction or a credit for taxes paid to foreign countries
Under the IRC, guaranteed payments are what?
Payments to partners for services rendered or the use of capital without regard to partnership income.
They are allowable tax deductions to the partnership and ordinary income to the partner receiving them.
Losses between a controlling partner (over 50% interest in capital and profits) and his controlled partnership from the sale or exchange of property are not allowed. (true or false)
true
In general, a partnership can distribute appreciated property tax-free to its partners (in general, a non liquidating distribution to a partner is nontaxable). Since a limited liability company (LLC) is taxed like a partnership (an LLC properly structured and with two or more owners is taxed like a limited partnership with no general partners), a limited liability company can distribute appreciated property to its owners tax-free. (true or false)
true
