Question

1. Danielle is a partner in, and sales manager for, DG Partners, a domestic business that is not a specified service trade or business. During the tax year, she receives guaranteed payments of $250,000 from DG Partners for her services to the partnership as its sales manager. In addition, her distributive share of DG Partners' ordinary income (its only item of income or loss) was $175,000. What is Danielle's qualified business income?

a. $175,000.

b. $-0-.

c. $250,000.

d. $425,000.

e. None of these choices are correct.

2.

Sharon contributed property to the newly formed QRST Partnership. The property had a $100,000 adjusted basis to Sharon and a $160,000 fair market value on the contribution date. The property was also encumbered by a $90,000 nonrecourse debt, which was transferred to the partnership on that date. Sharon is treated as a general partner. She is allocated 30% of QRST's profits, and 20% of QRST's losses. Sharon's basis in the partnership interest after the formation transaction is:

a. $88,000.

b. $28,000.

c. $127,000.

d. $118,000.

e. $37,000.

Answer 1

1	Danielle's qualified business income
a	$175,000
	Qualified business income is the income derived from qualified trade or business.
	Qualified trade or business is any trade or business other than specified service trade or
	business.
	Qualified business income does not include guaranteed payments.
2	Sharon's basis in partnership interest
	Adjusted basis of property contributed	$100,000
	Less: Nonrecourse debt assumed by other
	Partners (90000 x 70%)	$63,000
	Sharon's basis	$37,000
e	$37,000
	Nonrecourse debt is allocated according to profit ratio.