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41) Matt and Joel are equal partners in the MJ Partnership. For the current year ended December 31,.

by | Sep 9, 2023 | accounting

41) Matt and Joel are equal partners in the MJ Partnership. For the current year ended December 31, the partnership has book income of $80,000, which includes the following deductions: (1) guaranteed payments (salaries) to partners: Matt, $35,000; and Joel, $25,000; and (2) charitable contributions, $6,000. The book income amount does not include any sales of capital assets or Sec. 1231 assets or any tax-exempt income. Based on the above information, what amount should be reported as ordinary income on the partnership return?

A) $60,000

B) $80,000

C) $86,000

D) $140,000

42) Identify which of the following statements is true.

A) A partner's distributive share includes the full amount of partnership ordinary income, which she must report on her tax return plus her share of separately stated taxable and tax-exempt items.

B) Sam has a 20% interest in partnership capital and profits but a 40% interest in partnership losses. The partnership has no special allocations or precontribution gains or losses. In a year in which the partnership reports ordinary income of $100,000 and a capital loss of $30,000, Sam's distributive share is $20,000 ordinary income and $12,000 capital loss.

C) The partner's distributive share is the partner's share of any assets distributed by the partnership.

D) All of the above are false.

43) In computing the ordinary income of a partnership, a deduction is allowed for

A) net Sec. 1231 losses.

B) bad debts.

C) foreign income taxes paid.

D) charitable contributions.

44) Identify which of the following statements is true.

A) The Hunter Partnership has a net long-term capital gain of $4,000 and a net short-term capital loss of $1,000 for the current tax year. The gain and loss will be netted and the partners will include their proportionate share of the $3,000 net long-term capital gain on their return.

B) The Right Partnership sells a delivery truck and recognizes a gain of $2,000, which represents depreciation recaptured under Sec. 1245. The $2,000 gain will retain its identity as a separately stated item.

C) For tax purposes, the partnership takes a carryover basis in the contributed property that references the contributing partner's basis.

D) All of the above are false.

45) On January 2 of the current year, Calloway and Taylor contribute cash equally to form the CT Partnership. Calloway and Taylor share profits and losses in a ratio of 75% and 25%, respectively. The partnership's ordinary income for the year was $40,000. Calloway received a distribution of $5,000 during the year. What is Calloway's share of taxable income for the year?

A) $5,000

B) $10,000

C) $20,000

D) $30,000

46) The XYZ Partnership reports the following operating results for the current year:

Net long-term capital loss

($40,000)

Net Sec. 1231 loss

( 16,000)

Ordinary income

50,000

Tai has a 20% profits interest and a 25% loss interest in the XYZ Partnership. His distributive share of ordinary income is

A) $6,800.

B) $8,500.

C) $10,000.

D) $12,500.

47) Latoya owns a 10% interest in the ABC Partnership from January 1 through June 30 (the 181st day of the tax year) of the current year (a non-leap year). On July 1, Latoya buys an additional 10% interest in the partnership. The XYZ Partnership's ordinary income is $109,500 and it is earned evenly throughout the year. Latoya's distributive share of the ordinary income is

A) $16,380.

B) $16,425.

C) $16,470.

D) $21,900.

48) On December 1, Antonio, a member of a three-person partnership, purchases investment securities from the partnership for their $37,000 FMV. All partners share profits and losses equally. The securities were acquired by the partnership for $25,000 cash in March of the current year. What amount and character of gain will Antonio recognize because of this transaction?

A) $0 gain

B) $4,000 ordinary income

C) $4,000 short-term capital gain

D) $12,000 ordinary income

49) Meg and Abby are equal partners in the AM Partnership, which earns $40,000 ordinary income, $6,000 long-term capital gain (LTCG), and $2,000 Sec. 1231 loss during the current year. What is the amount and character of income that must be reported on Abby's tax return for this year's partnership operations?

A) $20,000 ordinary income, $3,000 LTCG, $1,000 Sec. 1231 loss

B) $19,000 ordinary income, $3,000 LTCG

C) $23,000 ordinary income, $1,000 Sec. 1231 loss

D) $22,000 ordinary income

50) On December 31 of last year, Alex and Jackson become equal partners in the AJ Partnership with assets having a tax basis and FMV of $120,000. The partnership, which deals in securities, had no liabilities at the end of last year. In January of this year, Franklin contributes his investment securities with an FMV of $60,000 (purchased two years ago at a cost of $45,000) to become an equal partner in the new AJF Partnership. The securities, which are inventory to the partnership, are sold on December 15 of the current year for $90,000. What amount and character of gain from the sale of these securities should be allocated to Franklin?

A) $10,000 ordinary income

B) $15,000 capital gain and $10,000 ordinary income

C) $25,000 capital gain

D) $25,000 ordinary income

  

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