Question

Partnerships                                  
Determine whether the following statements are True or False:                           TRUE       FALSE
                                  
1. Guaranteed payments to partners do not reduce the ordinary income of the partnership.   

2. Non recourse borrowing of a partnership increases threat risk basis of each partner in interest in the partnership.   

3. Tax exempt interest income decreases the basis of each partner's interest in the partnership.

4. A partner's basis in a partnership equals the fair market value of   the property contributed, plus the partner's share of all liabilities, minus any liability of the partner assumed by the partnership.   

5. A capital loss is deductible in order to determine the ordinary income of a partnership.                                  

6. In computing the ordinary income of a partnerships, charitable contributions are not deducted.                                  

7. The passive loss rules apply to a partner in a partnership.                                  

8. A partner does not recognize any income when services are exchanged for a partnership interest.   

9. An ordinary loss if fully deductible by a partner without regard to his partnerships basis.   

10. The holding period of property acquired by a partnership as a contribution by a partner includes the period during which the property was held by the contributing partner.   

11. After the initial formation of a partnership, the partner's basis will decrease by their pro rata share of losses.

12. Under Section 721, when a partner contributes property with a FMV that is higher than the property's adjusted basis, a pre contribution   gain is suspended and will be allocated 100% to the contributing partner when the property is sold by the partnership.                                  

13. Under Section 721, the partnership's basis in the contributed property   iis the contributors fair market value.

14. Section 1245 gains are separately stated items for a partnership.   

15. Under Section 721, if property contributed to a partnership is subject to a liability, a taxable gain may occur which would reduce a partner's basis.

Answer 1

Partnerships

1. False. Guaranteed payments to partners is a deductible expense to the partnership, thus it will reduce ordinary income of the partnership

2.False. A partner's share of nonrecourse liabilities is generally proportionate to his/her interest in partnership.

3. False. As it is exempted income, it will not be included to calculate tax basis of partner's interest in the partnership.

4. False. Partner's basis is calculated by taking into account adjusted basis of the property contributed.

5. False. The capital loss is deductible only from capital gain.

6. True.

7. True.

8. False. The partner must recognize the income to the extent of fair market value of the service rendered

9. False.

10. True.

11. True

12. True

13. False.

14. False.

15. True.