Category: Writing

In Januar y 2019, Joey contributed investment land he had
held two years with a FMV of $6,000 and an adjusted basis of $10,000, and
Rachel contributed $6,000 cash co form the Green Partnership as equal general
partners. During 2019, the partnership earned ordinary income of $10,000 and
made no distributions. On January 1, 2020, while the partnership still held the
land, Joey sold his interest in the partnership co Phoebe for $11,000. In April
2020, Green partnership sold for $5,400 the land chat Joey contributed. What
are the tax consequences of these transactions?
A partial list of research resources includes:
• Sec. 721
• Sec. 704(c)
• Sec. 705
• Sec. 741
• Reg. Sec. 1.704 -l(c)

The XYZ Partnership reports the following items during 2018:
Calculate ordinary income (or loss) by completing page 1 of Form 1065, and complete Schedule K (Partners’ Shares of Income, Credits, Deductions, etc.). Leave spaces blank on Form 1065 if information is not provided.

Charles is a 60% partner in CD Partnership, a calendar year
partnership. For 2019, Charles received a Schedule K-1 that reported his share
of partnership items as follows:
In addition, Charles and his wife, Charlene, had the
following items relating to activities outside the partnership:
Charles and Charlene have two dependent children, ages 7 and
9, and file a joint tax return. Calculate the following items for Charles and
Char lene. (Ignore the deduction for one-half of self-employment tax.)
a. Adjusted gross income (AGI)
b. Taxable income
c. Tax liability
d. Taxes due or refund

S Corporation Tenninations. Which of the following events
will cause termination or revocation of the S election for a calendar year
corporation? When is the termination or revocation effective? (Assume all ocher
requirements for an Selection are met and chat any termination is not
inadvertent. )
a. Best Corporation has 100 qualifying S corporation shareho
lders. Sam dies on October 13, and the estate holds his stock for the rest of
the year.
b. Assume the same facts as in Part a except the estate
distributes the stock ro Sam’s child before the end of the tax year. Sam’s
child did not previously own any Best stock.
c. Best issues nonvoting common stock to Susan’s two
children during the current year. Susan’s children did nor previously own any
Best stock.
d. Shareholders Susan, Ted, and Tim, who own 60% of the Best
stock, file the necessary form on October 1 ro revoke the election as of chis
date. All three shareholders are calendar year taxpayers.

Qualified Business Income Deduction and Net Business Interest Limitation. Charlene is an equal partner in the CD Partnership. The partnership does not qualify as a small business under the $25 million gross receipts test. The partnership incurred the following items for the current year. Ignore the deduction for one-half of self-employment tax.
Charlene is married and files a joint tax return, has no other sources of income, and claims the standard deduction. Calculate the partnership’s ordinary income for the current year and Charlene’s taxable income.

Reporting Partnership Income. Rita, a calendar year
taxpayer, is an employee of the RST Partnership, which has a June 30 year-end.
The partnership pays Rita a salary of $2,500 per month for the period January 1
through June 30, 2019. On July 1, 2019, she joins the partnership and receives
monthly drawings (distributions) of $2,500 for the 12-month period ending June
30, 2020. The drawings reflect her approximate share of partnership income for
the period July 1, 2019, through June 30, 2020. On June 30, 2020, Rita’s share
of partnership ordinary income is $40,000.
a. What amount of income does Rita report on her 2019 individual
tax return?
b. What amount of income does Rita report on her 2020
individual tax return?
c. Which part (if any) of Rita ‘s income is subject to
Social Security taxes?

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?

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?

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?