1) True or False: It is possible for a business to be taxed as a partnership even though one of its partners is a corporation.
2)True or False: when a partner’s share of debt is decreased, the reduction is treated as a cash distribution from the partnership to the partner.
3)True or False: organization costs of a partnership can be deducted when incurred or paid, or they can be amortized on a straight-line basis over a period not to exceed 60 months, provided the partnership files the proper election.
4) True or False: The contribution of depreciated property in a tax-free exchange for a partnership interest does not trigger the § 1245 or § 1250 depreciation recapture provisions.
5)True or False: An individual who contributes services in exchange for an unrestricted capital interest in a partnership has includible ordinary income equal to the fair market value of the capital interest.
6)True or False: Reasonable salaries paid to an S corporation’s shareholders who are employees are deductible business expenses. (The business was incorporated January 1 of the current year.)
7)An individual received a 70 percent capital interest in a general partnership by contributing the following:±Investment land purchased 10 years ago for $40,000 and valued at $90,000. There was a $50,000nonrecourse debt on the land that was also transferred to the partnership.±Services to organize the partnership valued at $22,500.±Business inventory purchased nine months ago for $10,000 and valued at $8,000. This general partner’s basis in the partnership after the contribution is:
a.$0 b.$22,500 c.$35,000 d.$57,500 e.$72,500
8)H receives a liquidating distribution of investment land with a partnership basis of $18,000 and a FMV of$40,000 when her basis in the partnership is $15,000. If a § 754 election is in effect, the bases of thepartnership’s remaining assets will be increased by
a.$0. b.$15,000. c.$22,000. d.$3,000. e.None of the above
