CER - devry -Acct424Quiz Week 5

CER - devry -Acct424Quiz Week 5 - . Question:

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. Question: (TCO 7) Harrison contributed $100,000 of cash in exchange for a 50% interest in the Miller partnership  capital and profits.  During the first year of partnership operations, Miller had net taxable income of  $50,000.  In addition Harrison received a $10,000 distribution of cash from the partnership and he has a  50% share in the $14,000 of partnership recourse liabilities on the last day of the partnership year.   Harrison’s adjusted basis (outside basis) for his partnership interest at year-end is: Your Answer: $100,000. $114,000. $122,000. CORRECT   $129,000. None of the above. Instructor Explanation: Because Harrison is a 50% partner, his basis will increase by 50% of the partnership’s taxable  income  and recourse liabilities.  The distribution reduces his basis.  Therefore, his basis is $100,000 contribution   + $25,000 share of income + $7,000 share of liabilities - $10,000 distribution.   Points Received: 2 of 2 2. Question: (TCO 7) In the current year, Daisy formed an equal partnership with Peter.  Daisy contributed land with an  adjusted basis of $15,000 and a fair market value of $75,000.  Daisy also contributed $25,000 cash to the  partnership.  Peter contributed land with an adjusted basis of $50,000 and a fair market value of $90,000.   The land contributed by Daisy was encumbered by a $10,000 nonrecourse debt.  Assume the partners  share debt equally.  Immediately after the formation, the basis of Peter’s partnership interest is: Your Answer: Instructor Explanation: Peter’s basis is determined as follows:
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Basis of land. ....$  50,000 Share of debt. ....... 5,000 Peter’s basis. ...... $55,000 Points Received: 2 of 2 3. Question: (TCO 7) A partnership will take a cost basis in an asset it acquires when: Your Answer: Instructor Explanation: The purchase of an asset from either a partner or an outside party will result in the asset taking a cost  basis to the partnership.  Under § 1031, a partnership takes a substituted basis for the asset received in  the exchange (choice a.).  When a partner contributes an asset to a partnership in exchange for a 
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CER - devry -Acct424Quiz Week 5 - . Question:

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