Question

1.- Determine the overall income or loss of STA Ltd, a publicly traded partnership, given the...

1.- Determine the overall income or loss of STA Ltd, a publicly traded partnership, given the following current-year amounts: $6,000 income, $2,500 in deductions, and $650 prior-year unallowed losses. A.- $650 gain. B.- $2,500 gain. C.- $2,850 gain. D.- $6,000 gain.

2.- How should a partner's passive loss, passive income, nonpassive loss and nonpassive income be categorized or identified on the partner's Schedule K-1 (Form 1065)? A.- Guaranteed payments. B.- Net rental real income (loss). C.- Ordinary Business income (loss) or D.- Other net rental income loss.

3.- Luna and Estella Clark formed Moon and Stars Ice Cream in 2017. Luna contributed $50,000 in cash and Estella contributed property with a FMV of $50,000. Estella purchased the land a few years ago for $30,000. What is Estella's outside basis in the partnership? A.- $50,000. B.- $30,000. C.- $15,000 or D.- $0.

Thank you so very much for your assistance!

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Homework Answers

Answer #1

1. Answer is C. $2850.

Overall Income = Ordinary Income - Deductions - Prior Year unallowed losses = $6000-$2500-$650 = $2850

Prior year unallowed losses can be carried forward and allowed from Current year income.

2. Answer is C. Ordinary business income(loss)

Several factors determine as to whether Income or loss is Passive or Non Passive.  Ordinary business income(loss) is reported in Box 1 in Schedule K-1 of Form 1065. It may be either Passive/ Non Passive Income/Loss.

3. Answer is B. $30000.

Since, Estella Purchased the property for $30000, hence the Tax Basis of the Property is $30000. Hence Estella's Outside basis is the same, whereas Partnership's Inside Basis in the Property is $50000.

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