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13 Dec 2019

Which one of the following is not adeductible expense in computing partnership ordinary income?

a. Guaranteed payments to partners

b. Salaries and wages paid to persons who are not partners

c. Investment interest

d. Contributions to employee benefit plans

e. All of the above are deductible in computing partnership ordinaryincome

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Elin Hessel
Elin HesselLv2
17 Dec 2019
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Related questions

Partnerships
Determine whether the following statements are True or False: TRUE FALSE

1. Guaranteed payments to partners do not reduce the ordinary income of the partnership.

2. Non recourse borrowing of a partnership increases threat risk basis of each partner in interest in the partnership.

3. Tax exempt interest income decreases the basis of each partner's interest in the partnership.

4. A partner's basis in a partnership equals the fair market value of the property contributed, plus the partner's share of all liabilities, minus any liability of the partner assumed by the partnership.

5. A capital loss is deductible in order to determine the ordinary income of a partnership.

6. In computing the ordinary income of a partnerships, charitable contributions are not deducted.

7. The passive loss rules apply to a partner in a partnership.


8. A partner does not recognize any income when services are exchanged for a partnership interest.

9. An ordinary loss if fully deductible by a partner without regard to his partnerships basis.

10. The holding period of property acquired by a partnership as a contribution by a partner includes the period during which the property was held by the contributing partner.

11. After the initial formation of a partnership, the partner's basis will decrease by their pro rata share of losses.

12. Under Section 721, when a partner contributes property with a FMV that is higher than the property's adjusted basis, a pre contribution gain is suspended and will be allocated 100% to the contributing partner when the property is sold by the partnership.

13. Under Section 721, the partnership's basis in the contributed property iis the contributors fair market value.

14. Section 1245 gains are separately stated items for a partnership.

15. Under Section 721, if property contributed to a partnership is subject to a liability, a taxable gain may occur which would reduce a partner's basis.

11. Bread Corporation is a C corporation with earnings of $150,000. It paid $60,000 of dividends to its sole shareholder, Gerald. Gerald also owns 100% of Butter, an S Corporation. Butter had net taxable income of $40,000 and made a $30,000 distribution to Gerald. What total income will Gerald report from Bread and ButterҀ™s activities?

$90,000

$190,000

$150,000

$100,000

12. At the first of the year, Arch and Bean contribute cash equally to form the JK partnership. Arch and Bean share profits and losses in a ratio of 75% to 25% respectively. For the current year, the partnership's ordinary income was $40,000. A distribution of $5,000 was made to Arch during the current year. What amount of ordinary income should Bean report from the JK partnership?

$5,000

$20,000

$10,000

$40,000

13. Identify which of the following statements is true.
All cash distributions from a partnership require the partners to pay taxes on those distributions.

Distribution of partnership income in the form of cash to partners is generally taxable to the

partners as long as there is sufficient basis.

If property distributions exceed the partner's basis in the partnership interest, a partner would not have to recognize gain on a distribution from the partnership.

All of the above are true.

14. Stan had a basis in his 50% partnership interest at the beginning of this year of $20,000 in a partnership in which he actively participates. There was no change in partnership liabilities during the year. The partnership's ordinary loss this year was $60,000 and the partnership had no separately stated items. The deductible loss from the partnership reported on Stan's personal income tax return this year is

$20,000

$0


$60,000

$30,000

15. The Qualified Business Income Deduction applies to individuals who own an interest in a:

C Corporation

Both a Partnership and an S Corporation

A partnership

S Corporation

Fred and George have been in partnership for many years. Thepartners, who share profits ad losses on a 60:40 basis,respecitvely, wish to retire and have agreed to liquidate thebusiness. Liquidation expenses are estimated to be 10,000. At thedate the partnership ceases operations, the balance sheet is asfollows:

Cash 100,000

Noncash assets 200,000

Total assets 300,000

Liabilities 80,000

Fred, Capital 100,000

George, Capital 120,000

Total liabilities and capital 300,000

Prepare journal entries for the following transactions:

a. Distributed safe cash payments to the partners.

b. Paid $40,000 of the partnership's liabilities.

c. Sold noncash assets for 220,000.

d. Distibuted safe cash payments to the partners.

e. Paid all remaining partnership liabilities of 40,000.

f. Paid 8,000 in liquidation expenses; no further expenses willbe incurred.

g. Distributed remaining cash held by the business to thepartners.

Prepare a final statement of partnership liquidation.

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