Question

1.

Which one of the following statements regarding partnership taxation is incorrect?

a.A partner's profit-sharing percentage may differ from the partner's loss-sharing percentage.

b.A partnership is required to file a return with the IRS.

c.A partnership is a tax-paying entity for Federal income tax purposes.

d.Partnership income is comprised of ordinary partnership income or loss and separately stated items.

e.All of these choices are correct.

2.

Which one of the following statements is true regarding a partner's personal liability for partnership assets?

a.In a limited partnership, all partners have limited liability for partnership debts.

b.In a limited liability partnership, a partner might be subject to liability for other partners' malpractice.

c.LLC members can never be liable for entity debts.

d.In a general partnership, all partners are liable for entity debts.

e.None of these statements are true.

3.

Exercise 10-24 (Algorithmic) (LO. 9)

At the beginning of the tax year, Barnaby's basis in the BBB Partnership was $178,200, including his $17,820 share of partnership debt. At the end of the tax year, his share of debt was $26,730. His share of the partnership's income for the year was $71,280, and he received cash distributions totaling $44,550. In addition, his share of the partnership's nontaxable income was $3,564.

How much is Barnaby's basis at the end of the tax year?
$......................?

Answer 1

1) Answer : Option C, A Partnership is a tax paying entity for federal Income Tax Purposes.

Explanation;  

The system by which the government takes money from individually and spend it on thing is known as taxation. A partnership is a tax paying entity for federal Income Tax purposes is an in correct statement.

2) Answer : Option D, In a General Partnership all partners are liable for entity debts.

Explanation;  

In a general partnerships all partners are liable for entity debt this statement is true regarding a partnership personal liability for partnership assets.

3). Barnaby's Basis at the end of the tax year = $217,404

Explanation;  

Initial Basis	$178,200
Partners Debt	$17,820
Initial Basis		$160,380
Income	$71,280
Tax Excempt	$3,564
Partners Debt	$26,730
Total		$101,574
Distribution		$(44,550)
End Basis		$217,404