All of the following are examples of partnerships EXCEPT: (a) Brian and his friend Manuel formed a limited liability partnership (LLP) for their landscaping business. (b) Ethan and his wife, Angelique, operate their restaurant activities as a qualified joint venture. (c) Frank and his sister Lenore co-own rental property. They do not provide any services for the activity. (d) Venus and her brother Stefan do not have a written partnership agreement. Together they own and operate an unincorporated graphic design company

All of the following are examples of partnerships EXCEPT: (a) Brian and his friend Manuel formed a limited liability partnership (LLP) for their landscaping business. (b) Ethan and his wife, Angelique, operate their restaurant activities as a qualified joint venture. (c) Frank and his sister Lenore co-own rental property. They do not provide any services for the activity. (d) Venus and her brother Stefan do not have a written partnership agreement. Together they own and operate an unincorporated graphic design company

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter10: Partnership Taxation

Section: Chapter Questions

Problem 1MCQ: Which of the following may not be treated as a partnership for tax purposes? Arnold and Willis...

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Which of the following is a disadvantage of general partnerships? ( a) The partners in a general partnership are exposed to double taxation. ( b) Compared to the other forms of ownership, the paperwork and costs involved in forming a general partnership are the most extensive. ( c) A partner who withdraws from a partnership cannot be held liable for any debts the furm had at the time of withdrawal. ( d) All general partners have unlimited liability for the debts and obligations of their business.
Kraft is a limited partner of Johnson Enterprises, a limited partnership. As provided in the limited partnership agreement, Kraft decided to leave the partnership and demanded that her capital contribution of $20,000 be returned. At this time, the partnership assets were $150,000 and liabilities to all creditors totaled $140,000. The partnership returned to Kraft her capital contribution of$20,000. a. What liability, if any, does Kraft have to the creditors of Johnson Enterprises? b. If Johnson Enterprises had been formed as a limited liability company, what liability, if any, would Kraft have to the creditors of Johnson Enterprises?
The partnership of Winn, Xie, Yang, and Zed has the following balance sheet: Zed is personally insolvent, and one of his creditors is considering suing the partnership for the $10,000 that is currently owed. The creditor realizes that this litigation could result in partnership liquidation and does not wish to force such an extreme action unless Zed is reasonably sure of obtaining at least $10,000 from the liquidation. Determine the amount for which the partnership must sell the other assets to ensure that Zed receives $10,000 from the liquidation. Liquidation expenses are expected to be $30,000.
Henry is the sole general partner in Middle Ranch Limited, a limited partnership. There are five limited partners. One day, Henry went to the grocery store to purchase groceries for himself. He forgot his personal checkbook. However, he had the partnership's checkbook. Unable to otherwise pay for the groceries, he wrote a check from the partnership account, thinking that he "owned" part of the money in the account anyway.
John, Jeff, and Jane decided to engage in a real estate venture as a partnership. John invested $80,500 cash and Jeff provided office equipment that is carried on his books at $79,800. The partners agree that the equipment has a fair value of $117,100. There is a $28,100 note payable remaining on the equipment to be assumed by the partnership. Although Jane has no physical assets to invest in the partnership, both John and Jeff believe that her experience as a real estate appraiser is a valuable skill needed by the partnership and is a basis for granting her a capital interest in the partnership.Assuming that each partner is to receive an equal capital interest in the partnership, (b) Record the partnership formation under the goodwill method, and assume a total goodwill of $85,500. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required,…
Phillips and Harris are partners in a used car business. Under their oral partnership, each has an equal voice in the conduct and management of the business. Because of their irregular business hours, the two further agreed that they could use any partnership vehicle as desired. This use includes transportation to and from work, even though the vehicles are for sale at all times. Harris conducted partnership business both at the used car lot and from his home. He was on call by Phillips or customers at his home, and he went back to the lot two or three times after going home. While driving a partnership vehicle home from the used car lot, Harris negligently hit a car driven by Cook, who brought this action against Harris and Phillips individually and as copartners for his injuries. Who is liable?
Which of the following statements is always true regarding accounting methods available to a partnership? A) If a partnership has a partner that is a personal service corporation, it cannot use the cash method. B) If a partnership is a tax shelter, it can use the cash method of accounting. C) If a partnership has a partner that is a C corporation, it cannot use the cash method. D) If a nontax-shelter partnership had average annual gross receipts of less than $26,000,000 (2021) for the last three tax years, it can use the cash method.
Which of the following statements is most true? a. The liability for other partners’ wrong doings is limited to the amount a particular partner has invested in the partnership. b. Partnerships are formed in accordance with specific guidelines that include the filing of a formal written agreement to the government. c. A fast growing firm would be more probable to establish a partnership as its business form than would a slow growing firm. d.Corporations can easier attract investors than those of the partnership and sole proprietor businesses.
Amy and Lester are partners in operating a store. Without consulting Amy, Lester enters into a contract to purchase $10,000 of merchandise for the store. Amy says she did not authorize the order and that she could have purchased the same merchandise for $7,000. Amy refuses to pay for the order. The vendor sues the partners. a. Must the partnership pay for the merchandise? If yes, how much? b. Assuming the partnership is a general partnership, can Amy’s personal assets be taken to pay for the merchandise?
The partnership of Matteson, Richton, and O’Toole has existed for a number of years. At the present time, the partners have the following capital balances and profit and loss sharing percentages: Partner Capital Balance Profit and Loss Percentage Matteson $ 149,600 40 % Richton 190,400 40 O’Toole 175,000 20 O’Toole elects to withdraw from the partnership, leaving Matteson and Richton to operate the business. Following the original partnership agreement, when a partner withdraws, the partnership and all of its individual assets are to be reassessed to current fair values by an independent appraiser. The withdrawing partner will receive cash or other assets equal to that partner’s current capital balance after including an appropriate share of any adjustment indicated by the appraisal. Gains and losses indicated by the appraisal are allocated using the regular profit and loss percentages. An independent appraiser is hired and estimates that the…
The partnership of Matteson, Richton, and O’Toole has existed for a number of years. At the present time, the partners have the following capital balances and profit and loss sharing percentages: Partner Capital Balance Profit and Loss Percentage Matteson $ 126,000 30 % Richton 174,000 45 O’Toole 155,000 25 O’Toole elects to withdraw from the partnership, leaving Matteson and Richton to operate the business. Following the original partnership agreement, when a partner withdraws, the partnership and all of its individual assets are to be reassessed to current fair values by an independent appraiser. The withdrawing partner will receive cash or other assets equal to that partner’s current capital balance after including an appropriate share of any adjustment indicated by the appraisal. Gains and losses indicated by the appraisal are allocated using the regular profit and loss percentages. An independent appraiser is hired and estimates that the…
B promised that he will deliver a house and lot for the partnership to use for its manufacturing process. On the agreed date, B was not able to show the partnership the location of the house and lot. Later on, B informed the partnership that the house and lot were burned down. What is the remedy of the partnership against B? The partnership may file a civil case to compel B to pay damages. The partnership may file a civil case for judicial settlement of B. The partnership may file a criminal complaint of estafa against B. The partnership may file a criminal complaint of trespassing against B.