1-A partner's interest in a partnership is decreased by:

a.Additional contributions by the partner.

b.Taxable income of the partnership.

c.Capital gains of the partnership.

d.Distributions from the partnership.

e.None of these choices are correct.

2- Jim's basis in his partnership is $200,000. His share of the current year partnership income is $60,000. The partnership paid him a $75,000 distribution in the current year. What is his new basis in the partnership at the end of the year and what is his taxable income from the partnership?

a.$185,000; $135,000

b.$260,000; $60,000

c.$200,000; $75,000

d.$185,000; $60,000

e.$140,000; $60,000

3- Which of the following statements is true about partnerships?

a.The formation of a partnership must be documented in writing.

b.An LLC is generally treated as a partnership for tax law purposes.

c.General partners have no liability for partnership obligations beyond their capital contributions.

d.When Sue and Billy Bob invest in land together, they are considered to have formed a partnership.

4- An equal partnership is formed by Rita and Gerry. Rita contributes cash of $10,000 and a building with a fair market value of $150,000, adjusted basis of $55,000, and subject to a liability of $60,000. Gerry contributes cash of $100,000. What amount of gain must Rita recognize as a result of this transaction?

a.$5,000

b.$0

c.$95,000

d.$35,000

e.None of these choices are correct.

5- The partnership of Truman and Hanover realized the following items of income during the year ended December 31, 2016:

Net income from operations$65,000Dividends from domestic corporations4,000Interest on corporate bonds3,000Net long-term capital gains5,000Net short-term capital gains1,000

Both the partners are on a calendar year basis. What is the total income which should be reported as ordinary income from business activities of the partnership for 2016?

a.$71,000

b.$65,000

c.$0

d.$69,000

e.None of these choices are correct.

6-Which of the following liabilities would be considered nonrecourse?

a.A $20,000 real estate loan which allows the bank to take the real estate if the taxpayer stops making payments on the loan.

b.Credit card debt.

c.A bank loan for which the taxpayer is personally liable.

d.All of these choices are nonrecourse liabilities.

7- On July 1 of the current year, Bertram acquired a 25 percent interest in Sycamore Company, a partnership, by contributing property with an adjusted basis of $7,000 and a fair market value of $12,000. The property was subject to a mortgage of $8,000, which was assumed by Sycamore Company. What is Bertram's basis in his partnership interest in Sycamore Company immediately after the partnership contribution?

a.$12,000

b.$1,000

c.$7,000

d.$0

e.None of these choices are correct.

8- Phil and Bill each own a 50 percent interest in P&B Interests. P&B Interests has ordinary income for the year of $35,000 before guaranteed payments to Phil. If Phil receives guaranteed payments of $20,000 during the tax year, what is the total income or loss that should be reported by Bill from the partnership for this tax year?

a.$7,500 income

b.$25,000 income

c.$5,000 income

d.$30,000 income

e.None of these choices are correct

9- Which of the following is adisadvantageof an LLC?

a.The states are not uniform in their treatment of limited liability companies.

b.There is no general partner requirement.

c.For security law purposes, an ownership interest in an LLC is not necessarily a security.

d.Taxable income and losses pass through to the owners.

10- Jamie decides to contribute cash and property to a partnership she and her friends started. She contributes a building worth $260,000 that has an adjusted basis of $100,000 and she also contributes $40,000 in cash. What is her basis in the partnership?

a.$300,000

b.$100,000

c.$140,000

d.$260,000

e.None of these choices are correct.

11- Which of the following istrueabout an LLC (Limited Liability Company)?

a.An LLC's limited liability is similar to a corporation's.

b.An LLC is always taxed like a partnership.

c.An LLC is always treated like a corporation for tax purposes.

d.An LLC must have at least two members.

e.All of these choices are false.

12- Under which of the following circumstances would a partnership terminate and close its tax year?

a.Entry of a new partner

b.Distribution of property to a 10 percent partner in complete termination of the partner's interest in the partnership

c.Divorce of a partner

d.Sale of an interest in a partnership by a partner who holds a 60 percent capital and profits interest

e.None of these choices are correct