2K5 Exported Questions
Becker Professional Review
Corr Ans: C
CPA-01695 ARE R03 #6
Thompson's basis in Starlight Partnership was $60,000 at the beginning of the year.
materially participates in the partnership's business.
Thompson received $20,000 in cash
distributions during the year.
Thompson's share of Starlight's current operations was a $65,000
ordinary loss and a $15,000 net long-term capital gain.
What is the amount of Thompson's
deductible loss for the period?
Choice "c" is correct.
A partner's deductible loss is limited to his basis plus any amounts that he
is personally liable for ("at risk" provision).
Thompson's basis would be calculated as follows:
Plus: Net LT capital gain
Less: Cash distribution
Basis for determining allowable loss deduction
Thompson would be allowed to take a loss deduction for $55,000 of the $65,000 ordinary loss
passed through to him from the partnership.
The remaining $10,000 would be carried forward
until additional basis became available.
Choice "a" is incorrect.
This choice assumes a partner can take a loss to the extent of capital
Choice "b" is incorrect.
This choice does not take into account the additional basis Thompson
receives for the pass through income (net long-term capital gain).
Choice "d" is incorrect.
Thompson's loss is limited to his basis plus any liabilities that he is
personally liable for.
His basis is calculated as above for this determination and the question
does not indicate he should receive any additional basis for any liabilities.
Corr Ans: C
CPA-01696 ARE R03 #10
Stone and Frazier decided to terminate the Woodwest Partnership as of December 31.
date, Woodwest's balance sheet was as follows:
Equipment (adjusted basis)
Capital - Stone
Capital - Frazier
The fair market value of the equipment was $3,000.
Frazier's outside basis in the partnership
Upon liquidation, Frazier received $1,500 in cash.
What gain should Frazier