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Assume the same facts as in Problem 1:17-33 except Barry and
Bart instead are considering the treatment of fringe benefits. Barry and Bart
want to provide group term life insurance and accident and health insurance for
themselves and their employees and plan ro make the premium payments from
business funds. Explain any restrictions that apply to each form of business
organization.

Bert and Jose plan to combine their unincorporated
businesses by forming a partnership. Bert has substantially appreciated
business assets. Moreover, if he transfers all the business’ liabilities and
assets, the liabilities will exceed the adjusted basis of the assets but not
their FMV. Jose will render services to the entity in addition to transferring
his business assets. What tax issues should Bert and Jose consider?

Helen and Helga are equal partners in the HH Partnership.
However, Helen devotes most of her time managing the business and believes that
she should be given additional compensation in the form of a guaranteed
payment. Currently, the partnership is operating at a break -even point (i.e.,
zero ordinary income and no separately stated items of income or loss). The
basis of each partner’s partnership interest also is negligible. Helen has
requested a $40,000 guaranteed payment as compensation for her additional
efforts. What tax issues should Helen and Helga consider?

Fonnation of a Partnership and Treatment of Liabilities .
Bonnie, Carlos, and Dale form the BCD Partnership as equal partners. Bonnie
contributes land and a building having a $50,000 adjusted basis and a $200,000
FMV that is subject to a $100,000 mortgage assumed by the partnership. The land
and the building originally cost $200,000, with $180,000 allocated to the
building and $20,000 allocated to the land. Bonnie had claimed $150,000 of
straight -line depreciation on the building. Carlos contributes cash of
$100,000, and Dale contributes land (a capital asset) having a $200,000 adjusted
basis and a $100,000 FMV. All assets have been held for more than one year.
Assume the part – ners have an equal economic risk of loss.
a. What are the amount and character of Bonnie’s recognized
gain or loss on the transfer?
b. What is Bonnie’s basis in her partnership interest?
c. What is Carlos’s basis in his partnership interest?
d. What are the amount and character of Dale’s recognized
gain or loss on the transfer?
e. What is Dale ‘s basis in his partnership interest?
f. What is the partnership’s basis for each of the
contributed properties?

Fonnation of a Partnership and Treatment of Liabilities . In
the current year, Dana transfers to the DE Partnership land and a building
having a total $25,000 adjusted basis and an $80,000 FMV. In addition, the
property is subject to a $70,000 mortgage. The land and the building cost
$105,000 when Dana acquired them in 1990, and Dana has claimed $80,000 of
straight -line depreciation on the building. The land and building originally
cost $20,000 and $85,000, respectively. Dana, who is active in the management
of the partnership, receives a one-half interest in the partnership. Assume the
partners’ economic risk of loss is equal to their interest in the partnership.
a. What are the amount and character of Dana ‘s recognized
gain or loss on the transfer?
b. What is Dana’s basis in her partnership interest?
c. When does Dana ‘s holding period for the partnership
interest begin?
d. What is the basis of the contributed properties to the DE
Partnership?

Fonnation of a Partnership and Loss Limitation . Dan, who is
active in the management of the partnership, contributes $10,000 in cash to the
newly formed DEF Partnership for a 10% interest in the partnership. The
partners transfer no liabilities to the partner – ship. During the
partnership’s first year, DEF borrows $75,000 from a bank and is liable for
accounts payable amounting to $180,000 at the end of the current year. The DEF
Partnership incurs a $400,000 ordinary loss during the current year.
a. How much of the ordinary loss may Dan deduct on his
individual tax return?
b. What is Dan ‘s basis in his partnership interest at the
end of the current year?
c. How much of the loss (if any) carries over to future
years?

Pass-Through of Income and  Separately Stated Items. Damien
and Donna are equal partners in the DD Partnership. The passive activity loss,
at-risk, and excess business loss limitation rules are nor applicable ro the
partners. The partnership reports the following items on its Schedule K during
the current year:
Damien ‘s basis in his partnership interest is $80,000 at
the beginning of the current year. The DD Partnership’s liabilities increased
by $20,000 during the current year.
a. What amounts should Damien report on his individual tax
return as a result of DD Partnership’s activities?
b. What is Damien ‘s basis in his partnership interest after
raking into account the Schedule K items?

Basis of a Partnership Interest. Anita has a one-half
interest in the AB Partnership. Anita’s basis in her interest at the beginning
of the current year is $75,000. During the year, the following events occur:
• Partnership liabilities increase by $50,000.
• Partnership earns $60,000 of ordinary income.
• Partnership recognizes $20,000 of capital losses.
• Partnership incurs $3,000 of nondeductib le expenses.
• Partnership earns $10,000 of tax-exempt interest.
• Anita withdraws $15,000 in cash.
• Anita contributes land having a $20,000 adjusted basis and
a $100,000 FMV as an additional capital contribution without increasing her
interest in the partnership.
a. What gain (if any) does Anita recognize on the transfer
of the land to the partnership?
b. What is Anita’s basis in her partnership interest at the
end of the current year?

Guaranteed Payments and Qualified Business Income Deduction
. Laura and Mark are equal partners in the LM Partnership. Laura receives a
$35,000 guaranteed payment in the current year and also withdraws $15,000 of
her partnership capital in cash. Partnership ordinary income is $100,000 after
deducting the guaranteed payments for the current year. Assume that Laura is
single and has salary income from other sources such that her marginal tax rate
is 24%. Also assume that, because she has other income, 20% of qualified
business income will be less than 20% of excess taxable income.
a. What amount must Laura include in her gross income, and
what is her taxable amount and after-tax income for the current year taking
into account the qualified business income deduction?
b. How would your answer change if Laura did not receive the
guaranteed payment?

Nonliquidating Distributions. Lynn’s basis in her
partnership interest is $9,000 when she receives a nonliquidating distribution
of $5,000 cash and land having a $6,000 adjusted basis and a $12,000 FMV.
a. What gain or loss does the partnership recognize when
making the distribution?
b. What are the amount and character of the income or gain
Lynn must recognize on the distribution?
c. What is Lynn’s basis in the land?
d. What is Lynn’s basis in her partnership interest after
the distribution?