1. 1.
Delilah receives a proportionate, nonliquidating distribution from the Carbon
Partnership. The distribution consists of $50,000 cash and property with an
adjusted basis to the partnership of $150,000 and a fair market value of
$180,000. Immediately before the distribution, Delilah’s adjusted basis for her
partnership interest is $170,000. Delilah’s basis in the noncash property
received is:

$180,000

$150,000

$120,000

$50,000

None of the above.

10 points

Question 2

1. Rosalie
is a real estate developer and owns property that is treated as inventory (not
a capital asset) in her business. She contributed a parcel of this land (basis
$40,000; fair market value $48,000) to a partnership, which will also hold it
as inventory. After three years, the partnership sells the land for $60,000.
The partnership will recognize a $20,000 capital gain on sale of the property.

True

False

10 points

Question 3

1. 1. Juliet
contributed property with a $48,000 basis and fair market value of $100,000 to
the JT Partnership in exchange for a 40% interest in partnership capital and
profits. During the first year of partnership operations, JT had net taxable
income of $40,000 and tax-exempt income of $80,000. The partnership distributed
$40,000 cash to Juliet. Her share of partnership recourse liabilities on the
last day of the partnership year was $30,000. Juliet’s adjusted basis (outside
basis) for her partnership interest at year-end is:

$64,000

$126,000

$70,000

$86,000

None of the above

Question 4

1. 1. Micah
and Ariana formed an equal partnership on June 1 of the current year. Micah
contributed $10,000 cash and land with a basis of $6,000 and a fair market
value of $15,000. Ariana contributed equipment with a basis of $30,000 and a
value of $25,000. Micah’s tax basis in his interest is $16,000; Ariana’s tax
basis is also $25,000.

True

False

Question 5

1. 1. The
Copper Partnership distributed $30,000 cash to Esme in a proportionate,
nonliquidating distribution. Esme’s basis in her partnership interest was
$20,000 immediately before the distribution. As a result of the distribution,
Esme’s basis is reduced to $0, and she recognizes $10,000 of capital gain.

True

False

10 points

Question 6

1. 1. Izzy’s
partnership interest basis is $60,000. Izzy receives a proportionate,
liquidating distribution from a liquidating partnership of $45,000 cash and
inventory having a basis of $20,000 to the partnership and a fair market value
of $6,000. Izzy assigns a basis of $6,000 to the inventory and recognizes a
$9,000 loss.

True

False

Question 7

1. 1. Piper
and Adam formed a partnership. Piper received a 50% interest in partnership
capital and profits in exchange for contributing land with a basis of $160,000
and a fair market value of $300,000. Adam received a 50% interest in
partnership capital and profits in exchange for contributing $300,000 of cash.
Three years after the contribution date, the land contributed by Piper is sold
by the partnership to a third party for $360,000. How much taxable gain will
Piper recognize from the sale?

$170,000

$140,000

$200,000

$30,000

None of the above

Question 8

1. 1. Molly
owns a 30% interest in the capital and profits of the Silver Partnership.
Immediately before she receives a proportionate nonliquidating distribution
from Silver, the basis of her partnership interest is $60,000. The distribution
consists of $20,000 in cash and land with a fair market value of $80,000.
Silver’s adjusted basis in the land immediately before the distribution is
$70,000. As a result of the distribution, Molly recognizes a gain of $30,000
and her basis in the land is $70,000.

True

False

Question 9

1. 1. Sydney
is a partner in the Lime Partnership, which is not publicly traded. Her
allocable share of Lime’s passive ordinary losses from a nonrealty activity for
the current year is ($300,000). Sydney has a $125,000 adjusted basis (outside
basis) for her interest in Lime (before deduction of any of the passive
losses). Her amount “at risk” under §Â 465 is $100,000 (before
deduction of any of the passive losses). She also has $60,000 of passive income
from other sources. How much of the $300,000 passive loss allocated to her can
Sydney deduct on her current year’s tax return?

$60,000

$100,000

$300,000

$125,000

None of the above

Question 10

1. 1. Joseph
has an outside basis of $80,000 in the Tungsten Partnership as of December 31
of the current year. On that date the partnership liquidates and distributes to
Joseph a proportionate distribution of $35,000 cash and inventory with an
inside basis to the partnership of $25,000 and a fair market value of $50,000.
In addition, Joseph receives a safe which has an inside basis and fair market
value of $4,500 and $6,000, respectively. None of the distribution is for
partnership goodwill. How much gain or loss will Joseph recognize on the
distribution, and what basis will he take in the safe?

$0 loss; $20,000 basis

$14,000 loss; $6,000 basis

$5,000 loss; $-0- basis

$15,500 loss; $4,500 basis

None of the above