Devry ACCT Week 5 quiz

Devry ACCT Week 5 quiz - 1. Question:

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1. Question: (TCO 7) Which of the following decreases a partner’s basis in his or her  partnership interest: Your Answer: Exempt income items. Taxable income items. Nondeductible expenses CORREC T An increase in a partner’s share of debt None of the above. Instructor Explanation: The partner’s basis in his or her partnership interest is increased by items of  income, an increase in a partners share of debt, and the excess of depletion  deductions over the adjusted basis of property subject to depletion.   It is  decreased by losses, a decrease in a partners share of debt, the special loss  deduction for oil and gas wells, and nondeductible items not chargeable to a  capital account.   Points Received: 2 of 2 2. Question: (TCO 7) Angie and Frank formed the AF Partnership four years ago. Because they  decided the company needed some expertise in multimedia presentations, they  offered Sophia a 1/3 interest in partnership capital and profits if she would come to  work for the partnership.  On July 1 of the current year, the unrestricted  partnership interest (fair market value of $50,000) was transferred to Sophia.  How  should Sophia treat the receipt of the partnership interest in the current year? Your Answer: Nontaxable. $50,000 short-term capital gain. $50,000 long-term capital gain. $50,000 ordinary income. CORREC T None of the above. Instructor Explanation: A person who receives an unrestricted partnership capital interest for services  rendered recognizes ordinary income when the interest is received.  The amount  of income recognized is the fair market value of the partnership interest on the  date it is received.   Points Received: 2 of 2 3. Question: (TCO 7) Keith, Bill, and Jim contributed assets to form the equal KBJ partnership.   Keith contributed cash of $30,000 and land with a basis of $60,000 (fair market  value of $50,000).  Bill contributed cash of $40,000 and land with a basis of  $20,000 (fair market value of $40,000).  Jim contributed cash of $60,000 and a  fully depreciated property ($0 basis) valued at $20,000.  Which of the following tax  treatments is  not  correct?
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Your Answer: Keith’s basis in his partnership interest is  $80,000. CORRECT ANSWER Bill’s basis in his partnership interest is $60,000. Jim’s basis in his partnership interest is $60,000. KBJ has a basis of $60,000, $20,000, and $0 in the  land and property (excluding cash) contributed by  Keith, Bill, and Jim, respectively. INCORRECT
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Devry ACCT Week 5 quiz - 1. Question:

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