1. Which of the following partnership owners is personally liable for the entitys debts to general creditors? Select the best answer and explain your answer. a. A general partner in a general partnership. b. A limited partner in a limited partnership. c. A member of a limited liability company. d. A partner in a limited liability limited partnership. e. None of these owners are personally liable for entity debts. 2. Julie contributed fully depreciated ($0 basis) property valued at $20,000 to the JK Partnership in exchange for a 50% interest in partnership capital and profits. During the first year of partnership operations, JK had net taxable income of $50,000. The partnership distributed $20,000 cash to Julie. What is Julies adjusted basis (outside basis) for her partnership interest at year-end? (show how you derived your answer). 3.During 2010, Shirley Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. On December 31, 2009, her stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. A. How much will Shirley report on her 2010 tax return as ordinary income? B. How much will Shirley report on her 2010 tax return as return of capital? C. How much will Shirley report on her 2010 tax return as capital gain? D. What is Shirleys basis in the S Corporation after she receives the distribution? 4. Which statement is incorrect with respect to an S shareholders consent? (select the best answer) a. An S election requires a consent from all of the S corporations shareholders. b. Both husband and wife must consent if one owns the stock as community property. c. A consent extension is available only if Form 2553 is filed on a timely basis, reasonable cause is given, and the interests of the government are not jeopardized. d. A consent must be in writing. e. None of the above statements is incorrect. 5. When property is contributed to a partnership for a capital and profits interest, the holding period of the contributing partners interest: (Select the best answer and explain your answer) a. May include the holding period of the contributed property. b. Always starts the day after the contribution date. c. Always starts the day the property was contributed. d. Never includes the holding period of the contributed property. e. None of the above. 6. Which of the following statements best describes Congresss rationale for limiting the taxable years a partnership may use? (select the best answer) a. The partnerships tax year should generally be as close as possible to the partners tax year ends to avoid deferral of time between when the partnership income is reported and when the partners report it on their tax returns. b. The partnership tax year must correspond to the partnerships natural business cycle. c. The partners should select a tax year that is as close as possible to the partnerships tax year to avoid deferral of time between when the partners and the partnership report the income. d. The partnership tax year must provide for a three month average deferral between the partners year end and the partnerships year end so that there is sufficient time between the dates the partnership and the partners file their tax returns. e. None of the above statements are true. 7. Haydens outside basis in his interest in the HIGH Partnership is $420,000. In a proportionate nonliquidating distribution, the partnership distributes to him cash of $100,000, inventory (fair market value of $90,000, basis to the partnership of $60,000), and land (fair market value of $100,000, basis to the partnership of $75,000). The partnership continues in existence. A. Does the partnership recognize any gain or loss as a result of this distribution? B. Does Hayden recognize any gain or loss as a result of this distribution? C. Calculate Haydens basis in the land, in the inventory, and in the partnership interest immediately following the distribution. 8. On January 1 of the current year, Sarah and Bart form an equal partnership. Sarah makes a cash contribution of $60,000 and a property contribution (adjusted basis of $160,000; fair market value of $140,000) in exchange for her interest in the partnership. Bart contributes property (adjusted basis of $120,000; fair market value of $200,000) in exchange for his partnership interest. A. What is Sarahs basis for her partnership interest? B. How much of Sarahs contribution to the partnership will be taxable 1. to the partnership? 2. to Sarah? C. What is Barts basis for his partnership interest? 9. Fern, Inc., Ivy Inc., and Jason formed a general partnership, each contributing equally. Fern, Inc. files its tax return on a July 1 - June 30 fiscal year; Ivy Inc. files on a September 1 - August 31 fiscal year; and Jason is a calendar year taxpayer. Which of the following statements is true regarding the taxable year the partnership can choose? (select the best answer and explain your answer) a. The partnership must choose the calendar year since it has no principal partners. b. The partnership can choose the taxable year of any of its principal partners without obtaining IRS permission. c. The partnership can choose a January 31 fiscal year without obtaining IRS permission, if the partnership can prove that the January 31 fiscal year will reduce the cost of preparing the partnership tax return. d. The partnership can choose the taxable year that provides for the least aggregate deferral without obtaining IRS permission. e. None of the above