Correct Answer C FFA EA Book Reference CH 14 Partnerships Subsection

Correct answer c ffa ea book reference ch 14

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Correct Answer: C FFA EA Book Reference: CH 14 Partnerships Subsection: Partnerships Subject: Partnership income, expenses, distributions, and flow-through (e.g, self employment income) 20. Explanation: The adjusted basis of a partner's partnership interest is ordinarily determined at the end of the partnership's tax year. However, if there has been a sale or exchange of all or part of the partner's interest or a liquidation of his or her entire interest in a partnership, the adjusted basis is determined on the date of sale, exchange, or liquidation. Correct Answer: D FFA EA Book Reference: CH 14 Partnerships Subsection: Partnerships Subject: Partner's dealings with partnership (e.g., exchange of property, guaranteed payment,contribution of property to partnership)
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21. Explanation: Guaranteed payments are those made by a partnership to a partner that are determined without regard to the partnership's income. A partnership treats guaranteed payments for services, or for the use of capital, as if they were made to a person who is not a partner. This treatment is for purposes of determining gross income and deductible business expenses only. Net operating losses, short term capital losses and contributions are not used when computing the ordinary income of a partnership. Correct Answer: B FFA EA Book Reference: CH 14 Partnerships Subsection: Partnerships Subject: Partnership income, expenses, distributions, and flow-through (e.g, self employment income) 22. Explanation: An individual and his or her spouse, ancestors, and lineal descendants are considered related in figuring ownership. Aunts, uncles, nieces and nephews are not considered lineal descendants for related-party purposes. Correct Answer: C FFA EA Book Reference: CH 14 Partnerships Subsection: Analysis of financial records Subject: Related party activity
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23. Explanation: Income from a partnership is allocated to partners on schedule K-1 according to their percentage ownership. Businesses report income based on a tax year, which may not always correspond to a calendar year. The entire amount of income for the tax year and must be reported on the corresponding tax year return of the individual partners. Correct Answer: A FFA EA Book Reference: CH 14 Partnerships Subsection: Partnerships Subject: Partnership income, expenses, distributions, and flow-through (e.g, self employment income) 24. Explanation: His total gain in the partnership sale is $1,500 ($5,000 - $3,500). In general, the sale of a partner's interest in a partnership yields either a capital gain or a capital loss unless the amounts include inventory or unrecovered receivables (these are treated as ordinary gains). The unrealized ordinary gain on the inventory is $2,000 ($8,000 FMV - $6,000 basis) and his 50% share is $1,000. He must report $1,000 of his gain as ordinary gain. Correct Answer: D FFA EA Book Reference: CH 14 Partnerships Subsection: Partnerships Subject: Disposition of partner's interest
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25. Explanation: A loss incurred from the abandonment or worthlessness of a partnership interest is an ordinary loss only if both of the following tests are met: The transaction is not a sale or exchange, and The partner has not received an actual or deemed distribution from the partnership. Correct Answer: D FFA EA Book Reference: CH 14 Partnerships Subsection: Partnerships Subject: Disposition of partner's interest
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