1. In the current year, the POD Partnership received revenues of $200,000 and paid the following amounts: $50,000 in rent and utilities, and $20,000 as a distribution to partner Olivia. In addition, the partnership earned $6,000 of long-term capital gains during the year. Partner Donald owns a 50% interest in the partnership. How much income must Donald report for the tax year?
a. $68,000 ordinary income.
b. $78,000 ordinary income.
c. $65,000 ordinary income; $3,000 of long-term capital gains.
d. $75,000 ordinary income; $3,000 of long-term capital gains.
None of the above.
2. Which of the following entity owners cannot participate in management of the entity?
a. A general partner in a general partnership.
b. A member of a limited liability company.
c. A partner in a limited liability partnership.
d. A limited partner in a limited liability limited partnership.
e. None of the above.
3. A partnership is an association formed by two or more taxpayers (who may be any type of entity) to carry on a trade or business.
True
False
4. Which of the following statements is correct regarding the manner in which partnership liabilities are reflected in the partners' bases in their partnership interests?
a. Nonrecourse debt is allocated to the partners according to their loss-sharing ratios.
b. Recourse debt is allocated to the partners to the extent of the partnership's minimum gain in the property.
c. An increase in partnership debts results in a decrease in the partners' bases in the partnership interest.
d. A decrease in partnership debt is treated as a distribution from the partnership to the partner and reduces the partner's basis in the partnership interest.
e. Partnership debt is not reflected in the partners' bases in their partnership interests.