Partnership Taxation

Question 1

Current distribution

Answer 1

nonliquidating partnership distribution made to a partner

Question 2

Limited liability partnership

Answer 2

differs from general partnerships in that partners are not liable for dames resulting from the negligence, malpractice or fraud committed by other partners.

Question 3

Limited partnership

Answer 3

has two classes of partners: limited and general.

limited partner cannot participate in the active management of the partnership or lose more than his or her capital contribution

Question 4

LIquidating distribution

Answer 4

terminates partner’s interest in the partnership

Question 5

Partnership ordinary income or loss

Answer 5

partnership items that do not need to be separately stated can be combined with the net amount passed through to the partners

Question 6

Sec 751 property

Answer 6

partnership’s unrealized receivables and appreciated inventory (includes recapture potential in depreciable assets).

Gain on sale of partnership interest must be recognized as ordinary income to the extent of partner’s share of section 751 property.

Question 7

Sec 754 election

Answer 7

adjustment in basis of its assets to prevent any inequities that might occur as a result of the partnership’s distribution of property or sale by a partner of a partnership interest