R4 Ptnerships, Estate/Gift tax, Ethics etc

Question 1

Partnership Formation G/L treatment

Answer 1

NO G/L
exceptions:
svces provided - ptern recogs ord inc @fmv of int
prop give-> liabs>AB = excess= gain to ptner

Question 2

Outside Basis

Answer 2

Ptner basis in interest
cas + prop@AB -shareliabs other ptners take care of + %liabs i take care of

if neg number then basis is zero
distribs later on will decrease AB
increase of share of liabs increases AB

Question 3

Inside Basis

Answer 3

Ptship basis in the assets received

basis = Ptner AB + gain recog by ptern

Question 4

holding periods

Answer 4

cap/1231- includes ptners HP

ordinary assets- HP begins at contrib

Question 5

Special Alloc

BING/L

Answer 5

when sold later, the orig BING/L is alloc to the cont ptner ONLY and the excess over that is alloc to ALL ptners including him

Question 6

Ptnership terminations

Effects & how it terminates

Answer 6

terminates if:

• > 50% interest changes hands within 12 months
• operations cease
• 1 ptner left = sole prop

effects

• deemed distrib of assets to ptners and the purch
• Hypothetical recontrib of assetsto a new ptship

Question 7

Transactions between a Ptship & the Ptner

Answer 7

Losses disallowed- add back to income the loss amount when calc the %share of income of ptner
Gains- on sale/exch of prop - ord or capG

Question 8

guaranteed pmts

Answer 8

not based on ratio or on profits

not reduce AB - deduc by ptship - includible in ptner GI

Question 9

Retirement Pmts

Answer 9

distrib treatment - reduce AB and when it reaches zero then the ptner recogs income.

Question 10

Nonliquidating & Liquidating Distribs

Basic Idea and G/L recog

Answer 10

Nonliquidating
- reduce AB by ABprop.
ABprop cant be>ABint-cash. if it is then ABprop gets whatever is left of ABint
not zero out. can have leftover in AB int

Liquidating
- give all your leftover ABint to the prop. must zero out.

gains for both recog if cashrecd>AB int
Loss only

Question 11

Sale of Ptship interest

Answer 11

AB (including %liabs)
(amt realized) —> (cash &liabs they take over)
= G/L -> CAPG/L except for part that represents AR/inv/depr prop

Question 12

Estates tax rets

Answer 12

Estate income tax - reqd when estate >600

Estate tax- 9mths after death. include 50%married prop, stuff in jt tenancy, incomplete&revocable gifts

Question 13

DNI

Answer 13

Limit on amount the estate can deduct
only income stuff nothing about corpus

deduction-> lesser of DNI-taxexempt income OR actual distrib

benef recogs income up to DNI amount. excess over that not recog

Question 14

Simple vs. Complex

Answer 14

COmplex- you may do what you want
-may accum earnings, distrib princ, deduct max cont. exemption 100

Simple
distrib ALL income. must keep corpus
300 exemption

Question 15

medical and admin exps

Answer 15

usually deducted from estate return BUT can elect to deduct on last inome tax return if waive

Question 16

deductions and credits on estate ret

Answer 16

unlmtd char deduc
unlmitd marital deduc
1,722,800 credit
OR 5,120,000 deduction

if deduc not used fully by husband, the wife can use the leftover when she dies

Question 17

Gift tax exclusion

Answer 17

13k
26k MFJ

per person and per year

Question 18

Tax preparer penalties

Answer 18

Undstmt -> unreas pos = greater1k or 50%$recd
Undstmt -> Reckless conduct =5k or 50%$
Not give copy of tax ret - (50)
Not sign
Not put tax ID #
Not retain records
not file correct info returns
endorsing a check (500)
screwing up the Earned income credit 
aiding&abetting undstms - even if had no knowl - 1k ppl 10kCorps
disclose info - 250
 -- can only disclose to court orders, state/local tax, peer review

Question 19

Cicular 230 Duties

Answer 19

address the practice before IRS of practitioners

• provide info
• not delay
• not help disbarred
• exIRS waiting periods
• fees- not unreasonable
• conflict of int bet clients- still can rep
• soliciting- not fake, if you publish prices cant charge more

Question 20

Circular 230 Doc Standard

Answer 20

NOT frivolous
inform of reas likely penalties
rely on info but make reas inquries
know of prob-> tell client -> cant go to IRS
-due diligence in prep and determining correctness
-return records unless fee dispute but still let them copy

Question 21

Covered opinion

Answer 21

about listed trans OR entity/plan/ptships that have tax evasion/avoidance as a purpose

Question 22

Marketed Opinion

Answer 22

used to sell, promote, mkt, a ptship, invmt plan, arrangment
NOT includ listed trans OR entity/plan/ptships that have tax evasion/avoidance as a purpose

Question 23

Reliance Opinion

Answer 23

covered opinion
>50% chance issue will be solved in your favor
NOT include listed trans OR entity/plan/ptships that have tax evasion/avoidance as a purpose
only if disclose that advice not intended to avoid penalties

Question 24

Taxpayer penalties

Answer 24

Earned Income credit wrong - lose 2 yrs
not make estim pmts
not file -5%tax due each moth
not pay - 1% tax due each month
undstmt/negligence - 20% undstmt
undstmt/substantial - 20%
substantial valuation misst - 20%
fraud - 75% undstmt plus jail time etc

Question 25

Reducing penalties for taxpayers - standards of conduct

Answer 25

NOT frivolous pos

Reas basis - 50%

Question 26

AICPA Standards

Answer 26

Tax Return Position -not frivolous
answers to Q- answer all even if not imp
estimate use - not need discl can rely
dep from prev position in court - can do if not bound
knowl of error- tell client not IRS without consent
form/content of advice -not need to update if not implementing