EA2 Study Unit 10.1-10.3 Partnership Operations Questions PDF

****EA2 Unit 10*** *****Partnership Operations Questions****** ****4)For the year ended December 31 of the current year, the JLC Partnership reported ordinary income of \$220,000, which included the following items of expenses and losses:**** Salaries paid (other than partners) \$50,000 Charitable contributions 4,000 Foreign income taxes 3,000 Real estate taxes for partnership office 8,000 Loss on the sale of machinery held 5 years 9,000 As a result of the above items, the partnership should increase its ordinary income and report what amount separately on its tax return? A.\$74,000 B.\$24,000 Answer (B) is incorrect.\ The real estate taxes are not separately stated. C.\$13,000 **D.\$16,000** **Answer (D) is correct.\ A partner must separately account for charitable contributions, taxes paid to foreign countries, and losses from the sale of property used in a trade or business (Code Sec. 702). Accordingly, the JLC Partnership must increase its ordinary income by \$16,000 (\$4,000 + \$3,000 + \$9,000) and separately state that amount on its Schedule K.** === 6)ABC is a calendar-year partnership with three partners: Alan, Bob, and Cathy. The profits and losses are shared in proportion to each partner's contributions. On January 1, the ratio was 90% for Alan, 5% for Bob, and 5% for Cathy. On December 1, Bob and Cathy each contributed additional amounts, and the new profit and loss sharing ratios were 30% for Alan, 35% for Bob, and 35% for Cathy. For its tax year ending December 31, the partnership had a loss of \$1,200. This loss occurred equally over the partnership's tax year. How is the loss allocated? A.Alan \$360, Bob \$420, Cathy \$420. Answer (A) is incorrect.\ The new profit/loss ratios do not take effect until December, when the additional capital contributions were made. B.Alan \$1,080, Bob \$60, Cathy \$60. C.Alan \$720, Bob \$240, Cathy \$240. **D.Alan \$1,020, Bob \$90, Cathy \$90.** **Answer (D) is correct.\ In determining his or her income tax, a partner must separately consider his or her distributive share of the partnership's income, gain, loss, deduction, or credit. If the loss occurred equally throughout the year, the partnership had a loss of \$100 per month, which is allocated to the partners based on their contributions throughout the year. Alan is allocated \$90 per month for 11 months and \$30 for December, for a total of \$1,020. Bob and Cathy are allocated \$5 per month for 11 months and \$35 for December, for a total of \$90 each.** === 8)With regard to the character of the gain or loss to a partnership on a later disposition of contributed property, which of the following statements is true? **A.For property that was an inventory item in the hands of the contributing partner, any gain or loss would be ordinary income or loss to the partnership only for dispositions within 5 years after the contribution.** **Answer (A) is correct.\ Under Sec. 724, unrealized receivables and inventory items contributed by the partner to the partnership retain their ordinary income character in the hands of the partnership. Unrealized receivables remain ordinary income property up to the time of disposal by the partnership, and inventory items remain ordinary income property for the 5-year period beginning on the date of contribution \[Sec. 735(a)\]. In addition, a partner's contribution of property with a built-in capital loss (when the fair market value of the property is less than its adjusted basis) results in retention of the property's capital loss status in the hands of the partnership to the extent of built-in loss for the 5-year period beginning on the date of contribution.** B.For property that was a capital asset in the hands of the contributing partner, any gain or loss would be ordinary income or loss to the partnership only for dispositions within 5 years after the contribution. C.All of the answers are correct. Answer (C) is incorrect.\ Not all of the answers are correct. D.For property that was an unrealized receivable in the hands of the contributing partner, any gain or loss would be ordinary income or loss to the partnership only for dispositions within 5 years after the contribution. === 11)In Year 1, B invested \$20,000 cash for a 55% interest in ABC Partnership. B materially participates in the partnership's business, and the partnership agreement states he is liable for all of the partnership's debts. The only partnership debt at year end was a \$17,000 loan from Cook Bank. Partner B and the other general partner had a separate agreement that B's liability would not exceed \$12,000. The partnership reported a \$60,000 ordinary loss for Year 1. Assuming there were no other adjustments to B's basis, what is the amount of B's deductible loss for Year 1? **A.\$32,000** **Answer (A) is correct.\ A general partner's basis in his or her partnership interest is increased by his or her share of the partnership's recourse liabilities for which (s)he is ultimately liable \[Code Sec. 752(a)\]. Partner B's ultimate share of the bank debt (\$12,000 per the separate agreement) plus his original basis of \$20,000 gives him an adjusted basis of \$32,000. Although Partner B's share of the partnership loss is 55% of \$60,000, or \$33,000, his deductible loss is limited to his adjusted basis of \$32,000 \[Sec. 704(d)\].** B.\$33,000 Answer (B) is incorrect.\ The amount of \$33,000 is Partner B's total share of the loss, not all of which is deductible. C.\$37,000 D.\$20,000 === 16)Partnership LIFE's profits and losses are shared equally among the four partners. The adjusted basis of Partner E's interest in the partnership on December 31, Year 1, was \$25,000. On January 2, Year 2, Partner E withdrew \$10,000 cash. The partnership reported \$200,000 as ordinary income on its Year 2 partnership return. In addition, \$5,000 for qualified travel, meals, and entertainment was shown on a separate attachment to E's Schedule K-1 of Form 1065. Due to the limitation, \$2,500 of the \$5,000 is unallowable as a deduction. What is the amount of E's basis in the partnership on December 31, Year 2? **A.\$60,000** **Answer (A) is correct.\ The adjusted basis of a partner's interest is the original basis of such interest, increased by the partner's distributive share of the partnership's income and allocable portion of liabilities, and decreased by the partner's distributive share of partnership loss and distributions (Secs. 705, 733, and 752). Partnership basis is also reduced by both deductible and nondeductible expenses.** **Beginning basis \$ 25,000** **Ordinary income (\$200,000 × 25%) 50,000** **Cash distribution (10,000) ** **Travel, meals, entertainment expense (5,000)** **Year-end basis \$ 60,000** B.\$65,000 Answer (B) is incorrect.\ Partnership basis is also reduced by both deductible and nondeductible qualified travel, meals, and entertainment expenses. C.\$61,000 D.\$75,000 === 18)L, M, and N formed an equal general partnership in January of the current year, each contributing \$1,000 cash and each actively participating in the business. Although the partnership is engaged in real estate rental activities, it does not qualify as a real property trade or business. The partnership uses the cash method of accounting. The partnership purchased real property for \$100,000, paying \$3,000 in cash and giving a \$97,000 non recourse note for which none of the partners is personally liable and that is not qualified real estate non recourse financing. The partnership incurred an operating loss of \$15,000 for the year. Each partner has adjusted gross income from other activities of approximately \$75,000 and no other passive losses. What is each partner's deductible share of the loss? A.\$5,000 B.\$0 Answer (B) is incorrect.\ The partners may deduct a share of the loss. **C.\$1,000** **Answer (C) is correct.\ Under Sec. 465, each partner may deduct a loss only to the extent that (s)he is at risk with respect to the activity. Since the \$97,000 note is non recourse, none of the partners has any risk with respect to it. Each partner is at risk with respect to only \$1,000. Note that Sec. 465 applies at the partner level rather than at the partnership level.** **Further, rental activity is generally passive. Passive losses must be netted at the partner level with other passive income and losses. Net passive losses from rental real estate activities may offset up to \$25,000 of active or portfolio income for partners who actively participate in the rental activity if their AGI is not too large. Each partner can deduct his or her \$1,000 passive loss from the rental real estate activity. Note that passive activity loss rules do not apply to certain taxpayers involved in a real property trade or business.** D.\$4,000 === 19)CDH Partnership, a fiscal-year partnership, is equally owned by C, D, and H. The partnership reported net income of \$120,000 for the tax year ending October 31, Year 1. Partner C, a calendar-year taxpayer, withdrew \$25,000 from his capital account during the fiscal year. The partnership reported net income of \$90,000 for the tax year ending October 31, Year 2. What is the amount of partnership income C must report on **his Year 1 income tax return**? A.\$30,000 **B.\$40,000** **Answer (B) is correct.\ When computing taxable income, a partner is required to include his or her share of partnership income and separately stated items for any partnership tax year that ends within his or her tax year \[Sec. 706(a)\]. Here, CDH Partnership's fiscal year ending October 31, Year 1, ended within C's calendar-year return for Year 1. C must report \$40,000 (his 1/3 share of the \$120,000 partnership income for the fiscal year ending October 31, Year 1). The withdrawal from C's capital account is merely a reduction in his basis.** C.\$25,000 D.\$65,000 Answer (D) is incorrect.\ The withdrawal from the capital account is not added to Year 1 income. === 21)On January 1, 2021, Thomas contributed real estate he held for investment to Fog Partnership, a dealer in real estate. The real estate had an adjusted basis to Thomas of \$50,000 and a fair market value at the time of the transfer of \$43,000. On June 1, 2023, Fog sold the real estate for \$40,000. What are the amount and the character of the partnership's loss? **A.\$7,000 capital loss; \$3,000 ordinary loss.** **Answer (A) is correct.\ The partnership's basis in the property was \$50,000 under Sec. 723. The loss realized and recognized on its sale was \$10,000 (Sec. 1001). If property is contributed that would have generated a capital loss if sold by the partner, a loss on the disposition of the property within 5 years of its contribution is a capital loss \[Sec. 724(c)\]. The amount of the loss characterized as capital is the \$7,000 amount of capital loss the contributing partner would have recognized if (s)he had sold the property on the contribution date (\$50,000 -- \$43,000). The remaining loss has the character it would have to the partnership.** B.\$10,000 capital loss; \$0 ordinary loss. C.\$3,000 capital loss; \$7,000 ordinary loss. Answer (C) is incorrect.\ The amount of the loss characterized as capital is the amount of capital loss the contributing partner would have recognized if (s)he had sold the property on the contribution date. D.\$10,000 ordinary loss; \$0 capital loss. ****===**** ****1)Under the terms of a partnership agreement, Annabelle is entitled to a fixed annual payment of \$10,000 without regard to the income of the partnership. Her distributive share of the partnership** **income is 10%. The partnership has \$50,000 of ordinary income after deducting the guaranteed payment. Which of the following states the amount and character of Annabelle's income from the partnership?**** A.\$15,000 of capital gain. B.\$10,000 of ordinary income and \$5,000 capital gain. Answer (B) is incorrect.\ The share of the partnership's earnings is ordinary income, not capital gain. **C.\$15,000 of ordinary income.** **Answer (C) is correct.\ The fixed salary paid to a partner, which is determined without regard to the income of the partnership, is a guaranteed payment under Sec. 707(c). The recipient partner includes the guaranteed payment as ordinary income. In addition, the partner will also include his or her portion of the ordinary income of the partnership. Annabelle will include \$5,000 (10% of \$50,000) plus the guaranteed payment of \$10,000, for a total of \$15,000 ordinary income.** D.\$10,000 capital gain and \$5,000 of ordinary income. === 2)Roland owns a 60% interest in Kramer Partnership and an 80% interest in Burns Partnership. In February 2022, Kramer sold land to Burns for \$80,000. The land had a basis to Kramer of \$90,000. In July 2023, Burns sold the land to Wilson, an unrelated individual, for \$84,000. What is the amount of gain (loss) that Burns Partnership should recognize in 2023? A.\$(6,000) **B.\$0** **Answer (B) is correct.\ Section 707(b)(1) provides that losses from sales or exchanges of property between two partnerships in which the same person or persons own more than 50% of the capital or profit interest are not deductible. When the property is subsequently sold, any realized gain is recognized only to the extent that it exceeds the unrecognized loss. Kramer's disallowed loss was \$10,000 (\$80,000 sales price -- \$90,000 basis). Burns realized a \$4,000 gain on the sale (\$84,000 sales price -- \$80,000 basis). Therefore, since the realized gain does not exceed the unrecognized loss, the gain is not recognized.** C.\$4,000 Answer (C) is incorrect.\ The gain on the sale is not recognized because it does not exceed the prior disallowed loss. D.\$(10,000) === 3)On March 1 of the current year, Jordan, a member of a three-man equal partnership, bought securities from the partnership for \$27,000, their market value. The securities had been acquired by the partnership for \$15,000 on August 1 of the previous year. By what amount will this transaction increase Jordan's taxable income for the year? **A.\$4,000** **Answer (A) is correct.\ The general rule under Sec. 707(a) is that, when a partner engages in a transaction with the partnership other than in his or her capacity as a partner, the transaction is considered to occur between the partnership and a non partner. This means that the partnership would recognize a gain of \$12,000 (\$27,000 proceeds -- \$15,000 basis). The increase in Jordan's taxable income as a result of his share of partnership income is \$4,000 (\$12,000 × 1/3).** B.\$0 Answer (B) is incorrect.\ The partnership will recognize a gain of \$12,000, of which \$4,000 passes through to Jordan. C.\$1,600 D.\$12,000 === 7)Under terms of the partnership agreement, Joyce is entitled to a fixed annual payment of \$20,000 and her partner \$30,000 without regard to the income of the partnership. Joyce's distributive share of the partnership income is 10%. The partnership income is \$60,000 of ordinary income after deducting the guaranteed payments. How much ordinary income from the partnership will be included on Joyce's individual income tax return? A.\$6,000 B.\$21,000 Answer (B) is incorrect.\ Both guaranteed payments are not subtracted before applying the income percentages. C.\$24,000 **D.\$26,000** **Answer (D) is correct.\ The fixed salary paid to a partner, which is determined without regard to the income of the partnership, is a guaranteed payment under Sec. 707(c). The recipient partner includes the guaranteed payment as ordinary income. In addition, the partner will also include his or her portion of the ordinary income of the partnership. Joyce will include \$6,000 (10% of \$60,000) plus the guaranteed payment of \$20,000, for a total of \$26,000 ordinary income.** **\$20,000 guaranteed + 6,000 (\$60,000 income × 10% share) = \$26,000** === 8)All of the following are true statements describing guaranteed payments **EXCEPT** A.Payments made to a partner without regard to the partnership's income. **B.Guaranteed payments to a partner cannot create a loss on the partnership return (Form 1065).** **Answer (B) is correct.\ Under Sec. 707(c), guaranteed payments are payments to a partner for services or for the use of capital that are determined without regard to the income of the partnership. Guaranteed payments are included as income in the recipient's tax year, which includes the end of the partnership tax year in which they were deducted. Guaranteed payments to a partner can create a partnership loss. In addition, Publication 541 states that, if this occurs, "the partner must report the full amount of the guaranteed payments as ordinary income. The partner separately takes into account his or her distributive share of the partnership loss, to the extent of the adjusted basis of the partner's partnership interest."** C.Guaranteed payments are included in income in the partner's tax year in which the partnership's tax year ends. D.Premiums for health insurance paid by a partnership on behalf of a partner for services as a partner are treated as guaranteed payments. Answer (D) is incorrect.\ Premiums for health insurance paid by a partnership on behalf of a partner for services as a partner are treated as guaranteed payments. === 15)Under a partnership agreement, Sherry is to receive 25% of the partnership income, but not less than \$10,000. The partnership has net income of \$30,000 for Year 1 before any allocation. Calculate Sherry's guaranteed payment from the partnership for Year 1. A.\$10,000 Answer (A) is incorrect.\ Sherry's minimum guaranteed amount from the partnership each year is \$10,000. B.\$0 **C.\$2,500** **Answer (C) is correct.\ Most guaranteed payments are in the form of a specific amount (e.g., a stated salary amount). Some guaranteed payments are in the form of a guaranteed minimum; that is, the partner is guaranteed a minimum amount from the partnership each year. In such a situation, the guaranteed payment is the excess of the partner's guaranteed minimum over the partner's distributive share. Sherry's guaranteed payment is \$2,500 \[\$10,000 guaranteed minimum -- (\$30,000 × 25%)\] and is deductible by the partnership. Sherry's 25% distributive share of partnership income before the guaranteed payment (\$30,000) is \$7,500. She reports it on her individual tax return \[Sec. 702(a)\]. The guaranteed payment of \$2,500 is also reported as ordinary income on her individual tax return.** D.\$7,500 === 18)Under a partnership agreement, Gil is to receive 40% of the partnership income, but not less than \$20,000. The partnership has net income of \$100,000 for Year 1 without regard to the minimum guaranteed and before any allocation. What is the amount and character of the income Gil is to receive for Year 1? A.\$20,000 guaranteed payment; \$20,000 distributive share. B.\$20,000 guaranteed payment; \$32,000 distributive share. Answer (B) is incorrect.\ ****Since Gil's distributive share of partnership income is more than the guaranteed payment, the guaranteed payment is not subtracted from net income before the distributive share is calculated.**** C.\$20,000 guaranteed payment; \$40,000 distributive share. **D.\$40,000 distributive share.** **Answer (D) is correct.\ Since the partnership's net income is \$100,000, Gil's portion of the net income is \$40,000. The \$40,000 is greater than the minimum guaranteed. The \$40,000 will be received in its entirety regardless of the minimum guaranteed. Therefore, all of the \$40,000 is considered distributive share.** === 21)On March 10, Year 1, Daniel contributed land in exchange for a 25% partnership interest in Parr Company. The fair market value of the land at that time was \$40,000, and Daniel's adjusted basis was \$25,000. On December 2, Year 3, Parr distributed that land to Daniel. The fair market value at that time was \$50,000. What is the amount of Daniel's recognized gain from this transaction? **A.\$0** **Answer (A) is correct.\ Generally, no gain is recognized on a distribution of property from a partnership. Remaining pre contribution gain may be recognized under Secs. 704 or 737 if property is distributed, but neither rule applies if a partner receives the property he contributed. Accordingly, Daniel recognizes no gain on the receipt of the land that he had contributed to the partnership.** B.\$10,000 C.\$15,000 Answer (C) is incorrect.\ *A partner does not recognize a pre contribution gain when (s)he receives a distribution of the property (s)he contributed.* D.\$25,000 === 24)In 2023, Barb and Bet Partnership sold land having a \$45,000 basis to the PTA Partnership for \$35,000. Pat has a 55% capital and profits interest in PTA, and his sister owns 60% of Barb and Bet. In 2024, PTA sells the land to an unrelated individual for \$47,000. How much gain or loss should Barb and Bet recognize on the subsequent sale of the land? A. 2023: \$0 2024: \$2,000 gain Answer (A) is incorrect.\ The sale of the land is to a related party; thus, no loss may be recognized on the transaction made in 2023. Further, although the sale is a related-party transaction, the original seller (Barb and Bet) of the property is not required to recognize any gain or loss on the subsequent sale of the property (by PTA) to an unrelated party. B. 2023: \$0 2024: \$12,000 gain C. 2023: \$0 2024: \$0 **Answer (C) is correct.\ In 2023, Barb and Bet Partnership sold the land to PTA Partnership for a loss of \$10,000 (\$35,000 sales price -- \$45,000 basis). However, Barb and Bet will not recognize any of the loss because the sale is to a related party. In addition, Barb and Bet will not recognize any gain or loss on the sale of the land by PTA to the unrelated party (i.e., basically, Barb and Bet Partnership is not a party to the subsequent sale). Note that the gain on the sale that must be recognized by PTA will be recognized only to the extent that it exceeds the previously disallowed loss \[i.e., \$2,000 (\$12,000 realized gain -- \$10,000 unrecognized loss)\].** D. 2023: \$10,000 loss 2024: \$0 ****1)Merlin and Nathan are equal partners in M & N Partnership. The partnership and both partners file their tax returns on a calendar-year basis. In Year 1, M & N had a \$20,000 loss, of which Nathan's share was \$10,000. Nathan's adjusted basis in his partnership interest was \$4,000 at the beginning of Year 1. For Year 2, M & N showed a profit of \$16,000. Nathan's share was \$8,000. If there were no other adjustments to Nathan's basis in Year 1 or Year 2,** **what amounts would Nathan show as his income or loss from M & N Partnership in Year 1 and Year 2?**** A. Year 1 \$4,000 Year 2 \$0 **B. Year 1 \$(4,000) Year 2 \$2,000** **Answer (B) is correct.\ A partner's distributive share of partnership loss is allowed only to the extent of the adjusted basis of such partner's interest in the partnership at the end of the partnership's tax year \[Sec. 704(d)\]. Any remaining loss that cannot be deducted in the current year may be deducted in a subsequent year when the partner's partnership basis is increased.** **In Year 1, Nathan should report a \$4,000 loss. There is a \$10,000 (\$20,000 × 50%) loss, but his basis limits the loss to \$4,000. The remaining \$6,000 loss (\$10,000 loss -- \$4,000 reported loss) may be deducted when his partnership basis is increased. In Year 2, Nathan's partnership basis is increased by \$8,000 (\$16,000 × 50%) profit, so he is entitled to report the remaining \$6,000 loss from Year 1. In Year 2, Nathan reports \$2,000 (\$8,000 income -- \$6,000 loss) of income.** C. Year 1 \$(10,000) Year 2 \$8,000 D. Year 1 \$0 Year 2 \$8,000 Answer (D) is incorrect.\ Nathan can recognize loss in Year 1 only up to his basis but can offset the remaining loss against income in Year 2. === 2)Jasmine, a calendar-year taxpayer, is a partner in Jasmine and Prince Partnership that has a fiscal year ending March 31. Starting April 1, 2024, Jasmine receives a fixed monthly guaranteed payment of \$1,000 a month without regard to the income of the partnership. How much of the guaranteed payments will Jasmine report on her 2024 tax return? A.\$9,000 **B.\$0** **Answer (B) is correct.\ For purposes of determining the partner's gross income, the guaranteed payment is treated as if made to a nonpartner. The partner separately states the guaranteed payment from any distributive share. The payment is ordinary income to the partner. Guaranteed payments are included as income in the recipient's tax year, which includes the end of the partnership tax year in which they were deducted. Thus, the guaranteed payments will not be reported in the partner's income until 2025.** C.\$8,000 D.\$12,000 Answer (D) is incorrect.\ Jasmine only received payments for 9 months of her tax year. === 5)The Rising Moon Partnership with a fiscal year ending March 31 terminated the partnership on January 31, 2024. If no extension is filed by Rising Moon, by what date must they file their final Form 1065, U.S. Return of Partnership Income? A.March 15, 2024. B.May 15, 2024. Answer (B) is incorrect.\ Rising Moon Partnership must file its return 2 1/2 months after the close of its fiscal year, or April 15, 2024. C.July 15, 2024. **D.April 15, 2024.** **Answer (D) is correct.\ If a partnership's accounting period is a calendar year, Form 1065 must be filed by March 15. However, if the partnership has a fiscal year, the return must be filed by the 15th day of the 3rd month following the close of its fiscal year. Because Rising Moon terminated the partnership on January 31, 2024, the fiscal year end changes from March 31 to January 31, 2024. Thus, Rising Moon Partnership must file its return 2 1/2 months after the close of its fiscal year, or April 15, 2024.** === 6)Dale's distributive share of income from the calendar-year partnership of Dale & Eck was \$50,000 in Year 1. On December 15, Year 1, Dale, who is a cash-basis taxpayer, received a \$27,000 distribution of the partnership's Year 1 income, with the \$23,000 balance paid to Dale in May of Year 2. In addition, Dale received a \$10,000 interest-free loan from the partnership in Year 1. This \$10,000 is to be offset against Dale's share of Year 2 partnership income. What total amount of partnership income is taxable to Dale in Year 1? A.\$27,000 Answer (A) is incorrect.\ The \$23,000 that was not distributed is also income in Year 1. **B.\$50,000** **Answer (B) is correct.\ Section 706(a) provides that the last day of the partnership's taxable year is the date used by the partners to report their distributive shares of the partnership's items of income, gain, loss, deduction, or credit and the guaranteed payment of salary or interest on capital received from the partnership. The \$50,000 should be reported by Dale for Year 1. The \$10,000 interest-free loan is not considered income to the partner. It will be considered a distribution next year.** C.\$60,000 D.\$37,000 === ****Unit 02 - Practice Exam, 3 questions - 67%**** 1)If you sell more livestock than you normally would in a year because of a drought, flood, or other weather-related condition, you may be able to postpone reporting the gain from selling the additional animals until the next year. You must meet all of the following conditions to make the election EXCEPT A.You can show that, under your usual business practices, you would not have sold the animals this year except for the weather-related conditions. Answer (A) is incorrect.\ This is a condition that must be met by a farmer in order to qualify for the election. B.Your principal trade or business is farming. C.The weather-related conditions caused an area to be designated as eligible for assistance by the federal government. **D.You use the accrual method of accounting.** **Answer (D) is correct.\ Publication 225 states, "If you sell or exchange more livestock, including poultry, than you normally would in a year because of a drought, flood, or other weather-related condition, you may be able to postpone reporting the gain from the additional animals until the next year. You must meet all the following conditions to qualify.** 1. **Your principal trade or business is farming.** 2. **You use the cash method of accounting.** 3. **You can show that, under your usual business practices, you wouldn't have sold or exchanged the additional animals this year except for the weather-related condition.** 4. **The weather-related condition caused an area to be designated as eligible for assistance by the federal government."** **** +-----------------------------------+-----------------------------------+ | 1)[]{#anchor} | []{#anchor-1}Shizaam Bakery | | | operates as a calendar year | | | partnership. Shizaam's two | | | partners, Kalla and Henry, share | | | profits and losses 60% and 40%, | | | respectively. For tax year ended | | | December 31, Year 1, Shizaam had | | | the following income and | | | expenses: | | | | | | Compute the partnership's | | | ordinary income and flow-through | | | amounts to partners. | | | []{#anchor-2} | +-----------------------------------+-----------------------------------+ | | | +-----------------------------------+-----------------------------------+ **** ------------------------------- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 12)[]{#anchor-3}[]{#anchor-4} []{#anchor-5}A partnership has \$1,000 of nonrecourse liabilities and \$500 of recourse liabilities. The recourse liabilities are attributable to Karen, who is a 50% partner. Karen contributed property with a fair market value of \$400 and an adjusted basis of \$250 for her interest in the partnership. The first year of business, the partnership incurred a \$4,000 loss. How much of this loss, if any, may Karen deduct on her tax return? []{#anchor-6} ------------------------------- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- **** **** **** ------------------------------ -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 5)[]{#anchor-7}[]{#anchor-8} []{#anchor-9}Under a partnership agreement, Gary is to receive 25% of the partnership income, but not less than \$12,000. At the end of Year 1, the partnership had net income of \$30,000. What is the amount the partnership can deduct as a guaranteed payment in Year 1?[]{#anchor-10} ------------------------------ -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ****

EA2 Study Unit 10.1-10.3 Partnership Operations Questions PDF

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