Question

1. For purposes of Sec. 751, inventory includes all of the following except

A) items held for sale in the ordinary course of business.

B) accounts receivable.

C) capital assets or 1231 property.

D) All of the above are inventory per Sec. 751.

2.

Which of the following is a valid reason for making a 754 election?

A) Partners are able to increase their basis in the partnership interest upon the sale of a partnership interest.

B) Partnerships can increase, but not decrease, their basis in partnership assets.

C) An incoming partner pays more for a partnership interest that his or her proportionate share of partnership assets.

D) A partnership can reduce its basis in assets upon cash distributions to partners.

3. Which one of the following individuals or entities is ineligible to be an S corporation shareholder?

A) an estate

B) resident alien of the United States

C) a voting trust where all of the beneficiaries are U.S. citizens

D) a partnership where all of the partners are U.S. citizens

Answer 1

1.Ans:C

capital assets or 1231 property.

All other options related to Inventory except capital assets or 1231 property.

Therefore For purposes of Sec. 751, inventory includes all except capital assets or 1231 property.

2.C) A

An incoming partner pays more for a partnership interest that his or her proportionate share of partnership assets.

Therefore C) An incoming partner pays more for a partnership interest that his or her proportionate share of partnership assets is a valid reason.

3 .D)

a partnership where all of the partners are U.S. citizens individuals or entities is ineligible to be an S corporation shareholder.