Multiple Choice Questions
1. Which of the following is (are) correct about the holding period of the property acquired by a partnership as a contribution to the contributing partner's capital account?
I. The holding period begins on the date the partner's holding period of the contributed asset began
II. The holding period depends on the character of the property transferred
III. The holding period excludes the period during which the property was held by the contributing partner
a. I and II
b. II and III
c. I only
d. None of the above
2. Guaranteed payments made by a partnership to partners for services rendered to the partnership include which of the following?
a. Sales of partners' assets to the partnership at guaranteed amounts regardless of market values
b. A salary of $170,000 annually without regard to partnership income
c. Payments of principal on secured notes honored at maturity
d. Net long-term capital gains earned by the partnership
3. Properly reported guaranteed payments have the following effect(s):
I. The guaranteed payment increases the receiving partner's ordinary income by the entire amount paid during the entity's tax year
II. The guaranteed payment decreases every partner's tax basis in the partnership
by the entire amount paid during the tax year
III. The guaranteed payment is either capitalized or deducted by the partnership in computing its ordinary income or loss for the tax year, depending on the nature of the services provided by the partner
a. All of the above
b. I and III, but not II
c. I and II, but not III
d. None of the above
4. On March 17, Packer became a partner in Cats & Dogs Co., an already formed partnership. Packer does not have property to contribute and thus contributes services in exchange for his 5% interest in Cats & Dogs. Cats & Dogs's net assets are as follows (including the value of Packer's services received by the partnership).
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