REG mod 37

Question 1

Partnerships file form 1065 because they are taxable entities. True / False

Answer 1

False. Partnerships file form 1065, but this is an informational return only. The partnership is not taxed because the income / loss flows through to the partners’ personal tax returns.

Question 2

What type of distribution cannot result in a loss?

Answer 2

Non-liquidating distribution

Question 3

When may a partnership use an alternate tax year?

Answer 3

When the partnership has a valid business purpose for doing so.

Question 4

When does a partner have a gain on a liquidating distribution?

Answer 4

Cash received > Basis

Question 5

What form is used to show the individual partner’s share of the income and expenses of the partnership?

Answer 5

Form K-1

Question 6

To what extent is a partner’s share of the partnership’s losses deductible?

Answer 6

To the extent that the partner has basis. The deduction is also limited by the partner’s at-risk basis and it may be limited by the passive activity loss limitations.

Question 7

Describe the treatment of organizational costs incurred while starting a partnership.

Answer 7

The partnership may be deducted $5,000 of the costs in the first tax year; this is reduced dollar for dollar if the organizational costs exceed $50,000. The remaining organizational costs are to be amortized over 180 months (15 Years).

Question 8

Describe at-risk basis.

Answer 8

At-risk basis is the partner’s basis in the property plus liabilities for which the partner is personally liable.

Question 9

What is the alternate method of calculating a partner’s basis?

Answer 9

Capital Account + Recourse Debt = Partner’s basis