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13 Dec 2019

A reduction of a partner's share of partnership liabilities will have what effect on the partner's basis in the partnership interest?

a.There is no effect on partnership basis.

b.The same result (basis reduction and/or gain recognition) as if the partner received a distribution of that same amount of cash.

c.A reduction of the partner's basis by the amount of the partner's share of liability reduction, without regard to the amount of the partner's basis before the liability share reduction.

d.An increase in the partner's basis by the amount of the partner's share of liability reduction, without regard to the amount of the partner's basis before the liability share reduction.

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17 Dec 2019
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Related questions

A limited partnership consisting of A, B, and C purchased a building for $100,000 paying $30,000 cash and taking a non-recourse mortgage of $70,000. Depreciation of the building is $10,000 per year. Their interest in profits and losses are 20%, 40%, and 40%. The partnership agrees to allocate recourse deduction equally (33 1/3%) to each partner. Assume the allocations of non-recourse deductions will be respected. The partnership agreement complies with the alternative test for economic effect and contains a minimum gain chargeback provision. Each partner's capital account on 1/1 of year 1 is $10,000.

a) What is the partnership minimum gain for year 2?

b) What are the non-recourse deductions for year 2?

c) How are non-recourse deductions allocated for year 2?

d) What is the partnership minimum gain for year 4?

e) What are the non-recourse deductions for year 4?

f) How are non-recourse deductions allocated for year 4?

g) What is each partner's share of partnership minimum gain at the end of year 4?

true and false questions

A redemption is always "essentially equivalent to a dividend"where a corporation's sole stockholder causes part of his shares tobe redeemed by the corporation.

When a partner receives a cash distribution from a partnershipthe partner always recognizes a gain on such distribution.

If a partner receives a non-liquidating cash distribution, thepartner will recognize a loss if the cash distributed is less thanthe partner's outside basis at the time of the distribution.

When a partner’s share of partnership liabilities and debts isreduced or relieved, such reduction or relief is treated as adeemed cash distribution which increases the partner’s outsidebasis.

A partner contributes property used in a trade or business to apartnership in return for a partnership interest. The partner heldthe property for 2 years prior to contribution. The partner thensells his partnership interest three weeks later. The contributingpartner will realize a short-term capital gain/loss on the sale ofhis partnership interest.

A distribution by a C-corporation that has Earnings and Profitsis always a dividend.

John is a 30% partner in the ABC Partnership with an outsidebasis of $42,000. ABC partnership distributes $15,000 of cash incomplete liquidation of John’s interest. John recognizes anordinary loss of $27,000 on the distribution

Like partnerships, an S corporation shareholder's stock basismust be adjusted annually.

A related party individual that receives a liquidatingdistribution from a corporation can recognize a loss

If a partnership makes a non-liquidating distribution oftangible property, and the inside basis of the property exceeds theoutside basis of the recipient-partner, the partner’s basis in thedistributed property is equal to his outside basis and he realizesgain on the difference between the inside basis and outsidebasis.

Outside basis is adjusted at the end of the tax year. TOR F


. A partner receives a distribution of cash, inventory and avehicle. His outside basis
is first allocated to the inventory, then to the cash and then tothe vehicle. T OR F

Any partnership debt that is allocated to another partner istreated as deemed cash
contribution. T OR F


Bobby owns 60 percent of the stock of ABC Corporation. Unrelatedindividuals
own the remaining 40 percent. For a stock redemption to be treatedas an exchange
under the "substantially disproportionate" rule, the redemptionmust reduce Bobby's
stock ownership below 48 percent T OR F


A partner can apply any passive activity losses against any passiveactivity income
for the year. T OR F


Flow-through S-corporation losses that are not deductible due toloss-limitation
rules are suspended and carried forward for 5 years. TOR F


. A shareholder that engages in a stock redemption will generallyrecognize a capital
gain or loss based on the FMV of the property received for thebasis of the stock
exchanged. T OR F


A partner that receives cash in a non-liquidating distributionrecognizes loss if the
cash distributed is less than the partner's outside basis in thepartnership immediately
before the distribution. T OR F


A partner that receives cash in a non-liquidating distributionrecognizes gain if the
cash distributed exceeds the partner's outside basis in thepartnership immediately
before the distribution. T OR F


Capital accounts reflect a partner’s value in the partnership, butunlike outside basis,
do not include allocable liabilities in its calculation. T OR F

A complete redemption of stock is always treated as a sale orexchange unless a
waivable activity occurs. T OR F

. Nonrecourse debt is generally allocated according to theprofit-sharing ratios of the
partnership. T OR F

A disproportionate distribution of hot assets is treated asthough the partnership
distributes a proportionate share of hot assets to the partner andthen the partner sells
those hot assets back to the partnership at fair market value inexchange for a portion
of the assets actually received in the distribution. T OR F

A partner recognizes gain when he receives cash in excess of hisoutside basis in a
liquidating distribution. T OR F

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