Exam w answers Essay

5253 WordsNov 30, 201422 Pages
1. Which, if either, of the following statements is or are true? I. The co-ownership of business property, where only minimal services are provided by the owners for their tenants, generally constitutes a partnership for federal income tax purposes. II. As a general rule, when a person obtains an interest in partnership capital through rendition of services, compensation (ordinary) income is recognized to the extent of the fair market value of the interest received. a. I only. b. II only. c. Both I and II. d. Neither I nor II. 2. Which, if either, of the following statements is or are true? I. On the formation of a partnership, the contribution by one partner of encumbered property to a partnership when…show more content…
c. Both I and II. d. Neither I nor II. 9. Which, if either, of the following statements is or are false? I. Tax exempt income received by a partnership, for example, municipal bond interest, does not increase a partner’s basis in his/her partnership interest because the income is not taxable. II. A partner who receives a current property distribution (other than cash), made pro rata to all the partners, will not have to report a gain with respect to the distribution. a. I only. b. II only. c. Both I and II. d. Neither I nor II. 10. Rex contributed land to the partnership of Rex, Tex, and Lex Partnership in exchange for a one-third interest in the Partnership. Rex’s adjusted basis in the land was $50,000 and its fair market value was $75,000. Rex’s Partnership capital account was credited with $75,000. Tex and Lex had each contributed $75,000 cash. Thus, each partner’s capital account was $75,000. What is Rex’s adjusted basis (outside basis) in his partnership interest? a. $75,000 b. $50,000 c. $37,500 d. cannot be determined from the facts stated 11. Ten years ago, Lisa acquired a one-third interest in Dee Associates, a general partnership. In the current taxable year, when Lisa’s entire interest in the partnership was liquidated, Dee Associates’ assets consisted of cash of $20,000 and tangible property with an adjusted basis to the partnership of $46,000 and a fair market value of

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