True or False

11. ____ A partner contributes $150,000 worth of inventory with a basis of $130,000 to a partnership in exchange for a 15% interest. The contribution is tax free because there is no control requirement for a nontaxable contribution to a partnership.

12. ____ Guaranteed payments represent payments to partners that are fixed at a specified percentage of partnership profits.

13. ____ Generally, an S corporation that was formerly a C corporation cannot use corporate loss carryovers from the C corporation years unless it is used to offset any built-in gains tax.

14. ____ The XLM Partnership makes the following allocations to partner Nancy for the year: 1) ordinary income of $90,000; 2) tax exempt income of $2,000; 3) and non-deductible expenses of $4,000. Nancy also takes a cash withdrawal of $70,000. Nancys outside basis prior to these items is $40,000. After these accounting for these items, Nancys outside basis is $60,000.

15. _____ If an S corporation is subject to the built-in gains tax, the corporation pays the entity level tax while the shareholders are still taxed on the pass through gain although that amount is reduced by the entity level taxes due.

16. _____ Tracey has a $10,000 basis in her partnership interest. At the end of the year, she is allocated $5,000 of partnership profits and is given a cash distribution of $13,000. Tracey will have a capital gain of $3,000 on the distribution because it exceeds her $10,000 basis and will also recognize $5,000 of ordinary income.