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ch20 Student: 1. Income earned by flow-through entities is usually taxed once at the entity level. True False Partnerships tax rules incorporate both the entity and aggregate approaches. True False The term "outside basis" refers to the partnership's basis in its assets; whereas, the term "inside basis" refers an individual partner's basis in her partnership interest. True False A partnership can elect to amortize organization and startup costs; however, syndication costs are not deductible. True False Nonrecourse debt is generally allocated according to the profit-sharing ratios of the partnership. True False Partners must generally treat the value of profits interests they receive in exchange for services as ordinary income. True False A purchased partnership interest has a holding period beginning on the date of purchase regardless of the type of property held by the partnership. True False Tax elections are rarely made at the partnership level. True False The least aggregate deferral test uses the profit percentage of each partner to determine the minimum amount of tax deferral for the partner group as a whole. True False A partnership with a C corporation partner must always use the accrual method as its accounting method. True False The character of each separately-stated item is determined at the partner level. True False Guaranteed payments are included in the calculation of a partnership's ordinary business income (loss) and are also treated as separately-stated items. True False A general partner's share of ordinary business income is similar to investment income; thus, a general partner only includes their guaranteed payments as self-employment income. True False Partnerships can use special allocations to shift built-in gains and built-in losses on contributed property from a partner who contributed the property to other partners. True False A partnership can request a five month extension by filing Form 7004 prior to the original due date of the partnership return. True False 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.
16. A partner's outside basis must first be decreased by any negative basis adjustments and then increased by any positive basis adjustments. True False Actual or deemed cash distributions in excess of a partner's outside basis are generally taxable as capital gains. True False Adjustments to a partner's outside basis are made annually to prevent double taxation on the sale of a partnership interest or at the time of a partnership distribution. True False Partners adjust their outside basis by adding non-deductible expenses and subtracting any tax-exempt income to avoid being double taxed. True False An additional allocation of partnership debt or relief of partnership debt is considered to be a deemed cash contribution or cash distribution respectively. True
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