Question :
51. Jordan files his income tax return a calendar-year basis. He : 1313615
51. Jordan files his income tax return on a calendar-year basis. He is the principal partner of a partnership reporting on a June 30 fiscal year end basis. Jordan’s share of the partnership’s ordinary income was $24,000 for the fiscal year ended June 30, 2014, and $72,000 for the fiscal year ended June 30, 2015. How much should Jordan report on his 2014 individual income tax return as his share of taxable income from the partnership?
a. $24,000
b. $36,000
c. $48,000
d. $72,000
e. None of the above
52. Under which of the following circumstances would a partnership terminate and close its tax year?
a. Divorce of a partner
b. Sale of an interest in a partnership by a partner who holds a 60 percent capital and profits interest
c. Entry of a new partner
d. Distribution of property to a 10 percent partner in complete termination of the partner’s interest in the partnership
e. None of the above
53. Kitty is a 60 percent partner of Tabby Associates. Kitty sells a building to the partnership for $75,000. If the building had an adjusted basis to Kitty of $95,000, how much gain or loss does Kitty recognize on this transaction?
a. $95,000 loss
b. $20,000 loss
c. $0 gain or loss
d. $20,000 gain
e. None of the above
54. Barry owns a 50 percent interest in B&B Interests, a partnership. His brother, Benny, owns a 35 percent interest in that same partnership, and the remaining 15 percent is owned by an unrelated individual. During 2014, Barry sells a rental property with a basis of $60,000 to B&B Interests for $100,000. The partnership intends to hold the rental as inventory for resale. What is the amount and nature of Barry’s gain or loss on this transaction?
a. $40,000 long-term capital loss
b. $0 gain or loss
c. $40,000 long-term capital gain
d. $40,000 ordinary income
e. None of the above
55. Owen owns 60 percent of the Big Time partnership. He sells to the partnership a machine for $70,000 that has a $45,000 basis. What would the taxable income be for Owen and what is the partnership’s basis in the machine?
a. $25,000; $45,000
b. $0; $45,000
c. $25,000; $70,000
d. None of the above is correct
56. Wallace and Pedersen have equal interests in the capital and profits of the partnership of Wallace and Pedersen, but are otherwise unrelated. On August 1, 2014, Wallace sold 100 shares of Kalmia Mining Corporation to the partnership for its fair market value of $7,000. Wallace had bought the stock in 2000 at a cost of $10,000. What is Wallace’s deductible loss for 2014 as a result of the sale of this stock?
a. $0
b. $1,500 long-term capital loss
c. $3,000 long-term capital loss
d. $3,000 ordinary loss
e. None of the above
57. Which of the following liabilities would be considered nonrecourse?
a. A bank loan for which the taxpayer is personally liable.
b. Credit card debt.
c. A $20,000 real estate loan which allows the bank to take the real estate if the taxpayer stops making payments on the loan.
d. All of the above are nonrecourse liabilities.
58. At the beginning of the year, Joe’s basis in his partnership interest was $5,000. During the year, Joe contributed $10,000 in cash to the partnership and signed a bank loan to be personally liable for the partnership’s debt of $25,000. For the current year, the partnership allocated a loss of $60,000 to Joe. In the following year, Joe’s portion of the partnership income is $30,000. Which of the following is accurate?
a. In the following year, Joe’s reportable taxable income from the partnership is $10,000.
b. Joe’s basis in his partnership at the end of the year is $15,000.
c. Joe may deduct all of the $60,000 loss in the current year.
d. Joe may carry over a $45,000 loss to the following year.
59. Which of the following is true about an LLC (Limited Liability Company)?
a. An LLC is always treated like a corporation for tax purposes.
b. An LLC must have at least two members.
c. An LLC is always taxed like a partnership.
d. An LLC’s limited liability is similar to a corporation’s.
e. All of the above are false.
60. Which of the following is a disadvantage of an LLC?
a. For security law purposes, an ownership interest in an LLC is not necessarily a security.
b. There is no general partner requirement.
c. Taxable income and losses pass through to the owners.
d. The states are not uniform in their treatment of limited liability companies.
