Mod 37 Wrong Answers Flashcards
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?
Compensation income = $8,000
Basis = $8,000
How do you calculate gain when partner contributes property with a mortgage?
Gain =
Portion of mortgage allocated to other partners
- adj. basis of contributed property
How do you calculate partner’s basis when partner contributes property with a mortgage?
Adjusted basis of contributed property
- portion of mortgage allocated to other partners
= partner’s basis
What is the principal business activity of a restaurant?
Food service
What is the principal product of service of a restaurant?
Food and drinks
Where are salaries and wages reported on form 1065? 2
line 1b
Line 1c
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…
$25,000 ($50,000 - $25,000)
In line 21 of form 1065, you should…
Add the total deductions
When dividends of $1,500 are given for a tax return, they are considered…
Both qualified and ordinary dividends
The section 179 deduction on schedule K goes on…
Line 12
Tax exempt interest income, where does it go on schedule K?
Line 18a
Distributions of cash and other marketable securities, where does it go on Schedule K?
Line 19a
On schedule, K-1 a partnership in Florida is…
Considered a domestic partnership (so check H)
For schedule K-1, when it asks what type of entity is this partner, it is?
Individual (line I1)
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…
1 List 50% for profit, loss and capital
2 Under “Ending” (line J)
Recourse debt on schedule K-1 is…
Multiplied by the partner’s interest
Under L, of schedule K-1 you should check…
Tax Basis
On schedule K-1 you should list partner’s beginning…
Capital account
Ordinary income on schedule K-1 is calculated by…
Multiplying ordinary income on schedule K by the partner’s %
For tax exempt income and Nondeductible expenses, what goes below line 18…
“A”
For distributions what goes below line 19?
“A”
% of ordinary income is added to guaranteed payments where on schedule K-1?
2) what goes next to it?
Line 14 self employment earnings (first line)
2) “A”
What goes in the second part of line 14 self employed earnings?
2) what does next to this item?
(Gross income - guaranteed payments) X partner’s % interest
2) “C”
On line L, the current year increase is calculated by adding all of the year’s income and subtracting 3
1 short term capital loss
2 sec. 179 deduction
3 other deductions
On schedule K-1, the lines that should be filled out are…4
1 beginning capital account
2 current year increase
3 withdrawals and distributions
4 ending capital account
Up to the amount of basis, when there is a distribution can…
2) example
Deduct as ordinary income
Ex. 5,000 basis, $6,000 loss and $300 capital gain
$5,300 can be deducted as ordinary loss
The deductibility of partnership losses is limited to amount of partner’s at risk basis and will also be subject to…
Passive activity loss limitations (if applicable)
At risk and passive activity loss limitations apply at…
2) rather than…
Apply at partner level
2) rather than partnership level
In computing the partnership ordinary income, charitable deductions…
Cannot be deducted
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?
$80,000, doesn’t matter if distributed
If stock contributed by an equal partner is sold by the partnership, the equal partner…
Pays the entire capital gain
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?
$10,000 = ($20,000 X 60% interest)
In a family partnership, services performed by family members must first…
Be reasonably compensated before income is allocated
A decrease in a partner’s share of partnership liabilities is deemed to be…2
1 distribution of money and
2 reduces partner’s basis of partnership interest
A partnership will be terminated when…3
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
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
1 Share of unrealized receivables and
2 appreciated inventory
In a nonliquidating partnership distribution, a gain or loss is…
Generally not recognized
In a nonliquidating partnership distribution, the basis of property distributed to a partner is…
Generally the same as partnership’s former basis for property
Transferred basis
Partnership’s former basis for property
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…
Will be limited to $6,000
The distributed basis of partnership property, distributed to a partner is…
Limited to that partner’s basis
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
1 first reduced by cash
2 the remaining basis is allocated to the land
In a nonliquidating distribution loss will
Not be recognized
In a nonliquidating distribution gain will be recognized only if…
Cash received exceeds basis for partner’s partnership interest
In a liquidating distribution the basis for partnership interest is first reduced by the amount of money received, it is then reduced by…
Partnership’s basis for any unrealized receivables and inventory
Received
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…
Other property received in proportion to adjusted bases (not FV)
In a complete liquidation when only money and inventory is received, loss can be calculated by…
Subtracting money and basis of inventory from partner’s basis
