Questions and Answers of Federal Taxation 2021 Corporations Partnerships Es

In the preceding question, assume that Midge was the only general partner of the partnership, and that the partnership allocated 50% of partnership losses to her, but only 10% of partnership profits.
In the previous question, what will be Susan’s remaining basis in her partnership interest in Anders Mountain Partners?a. $30,000.b. $15,000.c. $5,000.d. $0.
L and M are the only partners in LM Partnership. They decided to liquidate the partnership at a time when the balances in the two partners’ capital accounts were ($10,000) and $50,000,
Midge is a 10% limited partner in Wild Catter, an oil and gas drilling partnership. She received her partnership interest in exchange for a $10,000 investment in the partnership. The balance in her
Which is not a difference between a limited liability company and a limited liability partnership?a. An LLC, unlike an LLP or LLLP, can exist with only one owner.b. All members of an LLC have limited
What is the difference between a limited partnership and a limited liability limited partnership?a. Limited partners in a limited partnership do not participate in management, whereas those in a
J.D. Rackmore received a Schedule K-1 from a partnership reporting the following items of income, gain, loss, and deduction for the current year:J.D., who does not itemize deductions, has no other
Dale and Roy formed a partnership early this year. Dale contributed $150,000 cash in exchange for a 50% interest in the partnership. Roy contributed land with a tax basis of $90,000, and a fair
Gary contributed property to the GHK Partnership in exchange for a one-third interest in partnership capital, profits, and losses. Gary’s tax basis in the property contributed to the partnership
E and F form the equal general EF Partnership, with E contributing property with a basis of $350,000 and a fair market value of $300,000, and F contributing property with a basis of $200,000, and a
Which correctly describes the consequences of a contribution of property to a partnership when the property is encumbered by a liability?a. Overall, the liability increases the partner’s tax basis
R and Q form equal partnership RQ on February 15. Partner R has a tax year ending on July 31, whereas partner Q’s tax year ends on October 31. What taxable year must the partnership use?a. February
R and Q form equal partnership RQ on February 15. Partner R has a tax year ending on July 31, whereas partner Q’s tax year ends on October 31. What taxable year must the partnership use?a. February
Which is the best description of a partnership “current” distribution?a. A current distribution is a distribution of the partner’s share of the partnership’s current year (or current)
Susan is a one-third partner in Anders Mountain Partners. Last month, she received a non-liquidating cash distribution of $25,000. Her basis in her partnership interest prior to the distribution was
In Rev. Rul. 81-301, which of the following is not a factor considered by the IRS in determining whether a partner receives payments in her capacity as a partner, or is instead acting as a third
In October, Y1, T (a cash basis, calendar-year taxpayer), a member of the STUV LLC (an accrual basis, October 31 fiscal year partnership for tax purposes), performs nonrecurring legal services for
F is a partner in an investment partnership. She receives a payment equal to 10% of the partnership’s income in exchange for advising services rendered to the partnership. In the current year, the
Partner L of the LMN Partnership agrees to actively manage the partnership in return for a $6,000 distribution from the partnership each month. How should the $6,000 monthly payment be treated by
If a partner’s pass-through losses from a partnership meet the tests of Section 704(d) (basislimitations), will the provisions of Section 465 (at-risk limitations) apply to that same pass through
Which statement regarding net passive losses is accurate?a. Net passive losses do not reduce a partner’s basis and at-risk amounts, because the partner is not allowed to deduct them.b. No current
Carol owns 50 percent limited partnership interests in two partnerships. Both interests are properly classified as passive activities. This year, Carol’s share of income (loss) from each of the
K is a partner in an accounting firm. Her salary and other income totals $250,000 for the current year. In addition, she owns residential rental properties. For the current year, Property A generated
Jorge has investments in two limited partnerships, both of which constitute passive activities. This year, Jorge’s distributive share of income or loss from each partnership is as follows:In
Western High Country, LLC, is a limited liability company that has elected to be treated as a partnership for federal income tax purposes. The company operates a copy center in Pennsylvania and a
L and M form the LM Partnership with equal cash contributions of $300,000. The partnership then borrows $1,400,000 and purchases several tracts of land at a total cost of $1,900,000. Immediately
Carol owns 50 percent limited partnership interests in two partnerships. Both interests are properly classified as passive activities. This year, Carol’s share of income (loss) from each of the
K is a partner in an accounting firm. Her salary and other income totals $250,000 for the current year. In addition, she owns residential rental properties. For the current year, Property A generated
Jorge has investments in two limited partnerships, both of which constitute passive activities. This year, Jorge’s distributive share of income or loss from each partnership is as follows:In
Western High Country, LLC, is a limited liability company that has elected to be treated as a partnership for federal income tax purposes. The company operates a copy center in Pennsylvania and a
A taxpayer has qualified business income of $50,000 from partnership A and a qualified business loss of $30,000 from partnership B. Wages allocable to the taxpayer’s interest in partnership A were
Q is a 20 percent member in Lynn Properties, LLC. Because she is more involved than the other members in the LLC's activities, she receives a guaranteed payment from the LLC in the amount of $25,000
Which statement, regarding the method of reporting gains or losses from the sale of partnership assets is correct?a. Gain or loss from the sale of assets used in rental activities is separately
JD is a member in the Canyons North limited liability company. The LLC has opted to be treated as a partnership for federal income tax purposes. At the beginning of the taxable year, JD’s basis in
License to Drill, LLP, is a limited liability partnership in the irrigation business. The partnership was formed several years ago and has five partners and several employees. This year, which form
Under Subchapter K, the partnership files Form 1065 reporting its income to the IRS. Whichstatement is true?a. The partners pay income tax on the portion of that taxable income that is distributed to
Holly funded the Holly Marx Trust in January 2020. The entire trust income is payable to her adult son Jack for 20 years. At the end of the twentieth year, the trust assets are to pass to Holly’s
Your manager advises you that Sam Skinner, a long-time client, died on February 13 of the current year, survived by his wife Sue Skinner and several adult children. The Skinners are residents of a
What is the benefit of the 65-day rule?
Art Rutter sold an apartment building in May 2020 for a small amount of cash and a note payable with payments beginning in 2021. Principal and interest payments are due annually on the note in April
For the first five months of its existence (August through December 2020), the Estate of Amy Ennis had gross income (net of expenses) of $7,000 per month. For January through July 2021, the executor
A complex trust has taxable income of $29,900 in 2020. The $29,900 includes $5,000 of rental income and $25,000 of taxable interest income, reduced by the $100 personal exemption. The trust makes no
Suellen Symmes died on January 15, 2020. Her estate elected a November 30 year end. The executor projects that the estate will receive interest income of $50,000 by November 30, 2020, and will have
A simple trust has the following receipts and expenditures for 2020. The trust instrument is silent with respect to capital gains, and state law concerning trust accounting income follows the Uniform
A simple trust had a long-term capital loss of $10,000 for 2019 and a long-term capital gain of $15,000 for 2020. Its net accounting income and DNI are equal. Explain the tax treatment for the 2019
Refer to Problem C:14-42. How would your answer change if instead the trust were a complex trust that makes no distributions in 2019 and 2020? Assume the trust earns $8,000 of corporate bond interest
Refer to Problem C:14-45. Explain how your answers would change for each independent situation indicated below:a. At the end of the trust term, the property passes instead to Holly’s nephew
The following items are relevant for the first income tax return for the Ken Kimble Estate. Mr. Kimble, a cash method of accounting taxpayer, died on July 1, 2020.Dividends . . . . . . . . . . . . .
Joan died April 17, 2019. Joan’s executor chose March 31 as the tax year end for the estate. The estate’s only beneficiary, Kathy, reports on a calendar year. The executor of Joan’s estate
Dana Dodson died October 31, 2019, with a gross estate of $16.7 million, debts of $200,000, and a taxable estate of $16.5 million. Dana made no taxable gifts. All of her property passed under her
Glorietta Trust is an irrevocable discretionary trust funded by Grant Glorietta. The discretionary income beneficiary for life is Grant’s son, Gordon Glorietta (single). Gordon is a partner in a
Serena Calman has twin adult children who currently have considerable income but have not saved much for their retirement. She is considering funding a trust that will accumulate income until they
Cate Cole died in 2018, and her will left her entire estate in equal shares to her two adult children, Calvin and Corrine. Both children anticipate being in the top income tax bracket for at least
In 2014, Leon Lopez funded Lopez Trust #3, an irrevocable trust, at First Bank, 125 Seaview, Northwest City, WA 98112, for the benefit of his twin children, Loretta and Jorge. The trust’s tax ID
In 2012, Francois Landry, resident of Louisiana, funded the Landry Trust. The trust instrument stated that the beneficiaries of the trust shall be all the children of Claudette Landry Mercier, who is
Your employer is planning to present a program for clients that will address state income taxation of trusts and their beneficiaries. Each first year staff member has received a short assignment.
The IRS audited the tax returns of Darryl Blueberry, a former major league outfielder. It contended that, between 2013 and 2016, Blueberry earned $800,000 for autograph signings, appearances, and
Amy files her current year tax return on August 13 of the following year. She pays the amount due without requesting an extension. The tax shown on her return is $24,000. Her current year wage
Tony, a U.S. citizen, uses the calendar year as his tax year. Tony was transferred to Foreign Country C on June 15, 2018, and he immediately became a resident of that country. His employer transfers
Explain how a nonresident alien is taxed in the year of arrival and departure if he or she arrived in the United States on July 1, 2018, and immediately established U.S. residency, and departs from
Julia, a U.S. citizen, leaves the United States at noon on August 1, 2018, and arrives in Country P at 8:00 a.m. the next day. She immediately establishes in Country P a permanent residence, which
Fred, a U.S. citizen, arrives in Country K on July 15, 2018, and proceeds to a construction site in its oil fields. Once there, he moves into employer- provided housing where he is required to
In 2020, Stuart earns $275,000 of income in Country K and incurs and pays $43,805 of Country K income taxes. Determine the following amounts for Stuart: Foreign-earned income and allowable foreign
Dillon, a U.S. citizen, resides in Country K for all of 2020. Dillon is married and files a joint return. The following items pertain to his 2020 activities:Salary and allowances (other than for
Tien is a citizen of Country C, which does not have an income tax treaty with the United States. During the current year (2020), she is a nonresident alien for U.S. tax purposes and earns the
Hamilton, a U.S. corporation, reports the following results from its current year activities:U.S.-source taxable income . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000,000Foreign-source
Café du Monde, a U.S. corporation that is a purveyor of coffee, transfers its trademark to wholly owned CDM Enterprises, organized in the Republic of Anastasi, which does not have an income tax.
CyberQRX, a U.S. corporation, develops cybersecurity software for commercial use. It holds the patent to the software at its headquarters in Nevada. In the current year, CyberQRX generates $4.07
Lycos International, based in Miami, operates hotels and resorts in Florida, Nevada, and California. It books its hotel rooms through a travel agency that it owns. Lycos plans to relocate the travel
OffshoreInvest, incorporated in Country X, is owned in equal shares by a consortium of five U.S. companies. Country X levies a 3% value added tax, but no income tax. The only asset held by
John Lawrence Bailey is employed in Country T by American Conglomerate Corporation. Bailey has resided with his wife and three children in Country T for seven years. He made one five-day business
You have performed tax services for Mark Pruett, a U.S. citizen who is being transferred abroad by his employer. Mark’s 2020 salary and allowances in Country M will be $210,000, which is
August Couch died July 15, 2015. His estate tax return, filed on January 4, 2016, showed a taxable estate of $3.1 million with no estate tax payable. Form 706, Part 6, addressing Portability of
Bess, a widow, died in October 2020. Her gross estate, which totaled $12.5 million, included a $100,000 life insurance policy on her life that she gave away in 2018. The taxable gift that arose from
Maria Martinez died in 2020, survived by her spouse, Sergio, and two adult children. Her gross estate, all of which passed under her will, was valued at $17.2 million. She had Sec. 2053 deductions of
Joseph Jernigan died in 2020 with a taxable estate of $14.1 million. He was survived by his spouse Josephine and several children. He made taxable gifts of $100,000 in 1974 and $650,000 in 2000. The
Elaine died on May 1, 2020. Her gross estate consisted of the following items:Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,000Stocks
Giovanni died in 2020 with a gross estate of $13.9 million and debts of $30,000. He made post-1976 taxable gifts of $100,000, valued at $80,000 when Giovanni died. His estate paid state death taxes
Bonnie died on June 1, 2020, survived by her husband, Abner, and two sons, Carl and Doug. Bonnie’s only lifetime taxable gift was made in October 2016 in the taxable amount of $6.25 million. She
Gaylord Gunnison (GG) died January 13, 2020, and his gross estate consisted of three properties—cash, land, and stock in a public company. The amount of cash on the date of his death was $10.9
Steve Silver, a new client, owns stock in HyTeche, Inc., which recently had an initial public offering. In early 2020, his stock is valued at $8 million. His only other asset is $9 million of cash.
Matt Patterson died in early 2020 with a $14.5 million gross estate and no deductions other than a potential marital deduction. He bequeathed all his property to his spouse, Nancy, with the provision
Prepare an estate tax return (Form 706) for Marcia Miller, who died July 23, 2019. Marcia (born April 2, 1930) resided at 117 Brandywine Way, Eastern City, PA 19000 and was a lifelong Pennsylvania
Prepare an estate tax return (Form 706) for Adam Zugg of 45 Cornfield Place, Midwest City, IL 60000. Adam died October 31, 2019. He was survived by his wife, Callie, and their son, Zebulon. At the
Your long-time client, Harold (Hal) Holland will meet with your supervising partner next week for an estate planning appointment. Hal has been married to Winona Holland for 25 years. Hal is age 68
Arthur Zolnick died at age 84 on December 7, 2020. In March 2016, he transferred $4 million of stock to a charitable remainder annuity trust (CRAT) from which he named himself to receive $200,000 per
In May 2008, Jasper Mason died, survived by his spouse Amber Mason and four adult children. His gross estate was valued at $3 million, and he had Sec. 2053 deductions of $120,000. His will left the
George Tanner died October 2, 2020, survived by his son Thomas and his daughter Gigi Tanner Stewart and her children, Sam and Cindy. George was the sole stockholder of Tanner, Inc., a C corporation.
Your firm has prepared the estate tax return (Form 706) for the Estate of Belinda Baker, a widow who died January 13, 2020. Besides substantial amounts of cash, mostly in certificates of deposit, she
Will, a bachelor, died in 2020. At that time, his sole asset was cash of $15 million. Assume no debts or funeral and administration expenses and no charitable bequests. His gift history was as
Sam Snider died February 14, 2019, survived by his spouse Janet and several children. Sam had not made any taxable gifts. Sam’s gross estate was $7 million. In each of the following independent
Assume the same facts as in Problem C:13-48 and that before Yuji’s death in 2020 his wife already owned property valued at $300,000. Assume that each asset owned by each spouse increased 8% in
Assume the same facts as in Problem C:13-47 except that Yuji’s will also provided for setting up a trust to be funded with $400,000 of property with a bank named as trustee. His wife is to receive
When Yuji died in March 2020, his gross estate was valued at $15 million. He owed debts totaling $300,000. Funeral and administration expenses were $12,000 and $120,000, respectively. Yuji willed his
Refer to Problem C:13-45. What is the net addition to Joy’s taxable estate attributable to the insurance policies, including marital deduction implications?Data From C:13-45:Joy died on November 5,
Joy died on November 5, 2020. Soon after Joy’s death, the executor discovered the following insurance policies on Joy’s life.Joy transferred ownership of policies 757 and 848 to her son in 2010.
Ten years ago, Art purchased land for $60,000 and immediately titled it in the names of Art and Bart, joint tenants with right of survivorship. Bart paid no consideration. In 2020, Art died and was
Twelve years ago, Latoya transferred property to an irrevocable trust with a bank trustee. Latoya named Al to receive the trust income annually for life and Pat or Pat’s estate to receive the
John died in 2020. What amount, if any, was included in his gross estate in each of the following situations:a. In 2007, John created a revocable trust, funded it with $400,000 of assets, and named a
In December 2017, Curt and Kate elected gift splitting to report $16,228,000 of gifts of stocks Curt made to Curt, Jr. Each paid gift taxes of $1,060,000 by spending his or her own funds. Kate died

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