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Which of the following is true about the partnership's allocation of loss?

Which of the following is true about the partnership's allocation of loss?

SWFT Essntl Tax Individ/Bus Entities 2020
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter14: Partnerships And Limited Liability Entities
Section: Chapter Questions
Problem 29P
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Which of the following is not a potential entity level tax for an S corporation that was formerly a C corporation? Tax on built-in gains Tax on excess passive income Accumulated Earnings Tax LIFO recapture tax determined at the time of the status switch
Transcribed Image Text:Which of the following is not a potential entity level tax for an S corporation that was formerly a C corporation? Tax on built-in gains Tax on excess passive income Accumulated Earnings Tax LIFO recapture tax determined at the time of the status switch
Martinsburg Town Partnership has two equal partners with capital accounts and outside bases as follows: Partner Capital Account Outside Basis Smith 30,000 40,000 Williams 30,000 40,000 The partnership incurs $20,000 of loss and makes a special allocation of $16,000 of the loss to Smith and $4,000 of the loss to Williams. The same allocation is made for both partnership taxable income and for accounting income/capital account purposes. Which of the following is true about the partnership's allocation of loss? There's nothing obviously wrong with this special allocation The partnership cannot allocate the loss this way because the partnership must allocate losses equally. The tax allocation cannot be allowed because it lacks economic effect Cannot be determined
Transcribed Image Text:Martinsburg Town Partnership has two equal partners with capital accounts and outside bases as follows: Partner Capital Account Outside Basis Smith 30,000 40,000 Williams 30,000 40,000 The partnership incurs $20,000 of loss and makes a special allocation of $16,000 of the loss to Smith and $4,000 of the loss to Williams. The same allocation is made for both partnership taxable income and for accounting income/capital account purposes. Which of the following is true about the partnership's allocation of loss? There's nothing obviously wrong with this special allocation The partnership cannot allocate the loss this way because the partnership must allocate losses equally. The tax allocation cannot be allowed because it lacks economic effect Cannot be determined
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