26. At the beginning of 2014, Margarets adjusted basis in her 50 percent interest in MP Partnership, a calendar year general partnership, was $10,000. During 2014, Margaret did not make any additional contributions to MP Partnership, and Margarets share of MP Partnership liabilities did not change. During 2014, MP Partnership distributed $5,000 to Margaret, and MP Partnership had the following items of partnership income, deduction, gain and loss for 2014:

Separately stated taxable income $30,000

Tax-exempt interest $10,000

Capital loss ($20,000)

What is Margarets adjusted basis in her partnership interest in MP Partnership at the end of 2014?

a. 0.

b. $10,000.

c. $15,000.

d. $25,000.

20. Jim, one of two equal partners of the JJ Partnership, a general partnership, contributed business property with an adjusted basis to him of $15,000 and a fair market value of $10,000 to the JJ Partnership. Jims capital account was credited with $10,000. The property later was sold for $12,000. As a result of this sale, how much gain or loss must Jim report on his personal income tax return?

a. $1,000 gain

b. $1,500 loss

c. $2,000 gain

d. $3,000 loss

17. When inventory that was contributed to a partnership in exchange for a partnership interest is eventually sold by the partnership, how will the character of the income or loss be determined?

a. The character of any income or loss will be ordinary regardless of when the contributed property is sold by the partnership and regardless of the character of the asset in the hands of the partnership.

b. The character of any income or loss will be ordinary if the contributed property is sold by the partnership within five years after the date of contribution regardless of the character of the asset in the hands of the partnership.

c. The character of any income or loss will be based on the character of the asset in the hands of the partnership regardless of when the contributed property is sold by the partnership.

d. The character of any income or loss will be ordinary to the extent of the contributing partners built-in gain or loss in the property at the time of the contribution regardless of when the contributed property is sold, and any balance will based on the character of the asset in the hands of the partnership.

14. Gary is a one-third partner in GNG Partners. a general partnership. Garys adjusted basis in his partnership interest is $25,000. Gary received a distribution of real estate in a non-liquidating distribution from the partnership. The real estate had an adjusted basis to the partnership of $20,000 and a fair market value of $50,000 on the date of distribution. What is Garys basis in the real property received in the non-liquidating distribution?

a. 0

b. $20,000

c. $25,000

d. $50,000

11. Ten years ago, Lisa acquired a one-third interest in Dee Associates, a general partnership. In the current taxable year, when Lisas entire interest in the partnership was liquidated, Dee Associates assets consisted of cash of $20,000 and tangible property with an adjusted basis to the partnership of $46,000 and a fair market value of $40,000 on the date of distribution. Dee Associates had no liabilities. Lisas adjusted basis in her one-third interest in the partnership was $22,000. Lisa received cash of $20,000 in complete liquidation of her entire interest. How much loss will Lisa recognize upon receipt of the liquidating distribution?

a. 0

b. $2,000 short-term capital loss

c. $2,000 long-term capital loss

d. $2,000 ordinary loss

12. Mark, Pete and Mickey are equal partners in the 2MP Partnership, a general partnership. On January 1, 2014, Marks adjusted basis in his partnership interest was $15,000, Petes adjusted basis in his partnership interest was $10,000, and Mickeys adjusted basis in his partnership interest was $20,000. The partnership had taxable income of $30,000 in 2014 which was allocated equally among the partners. On December 31, 2014, the partnership made a non-liquidating distribution of $25,000 cash to Pete. How much income or gain did Pete recognize as a result of the distribution?

a. 0

b. $5,000

c. $15,000

d. $25,000

4. On January 2, 2015, Henry, Cabot, and Lodge formed a three-person equal partnership with Henry and Cabot each contributing $100,000 and Lodge contributing securities with a basis to him of $60,000 and a fair market value of $100,000. On February 28, 2015, the partnership sold the securities for $130,000. The amount of the gain to be allocated to Lodge is

a. $70,000.

b. $50,000.

c. $30,000.

d. $23,333.

e. $10,000.

5. Malcolm, a dealer in securities, is a 60 percent owner of the Real Partnership which on July 1, 2015, sold to him Acme Securities which it had held as an investment for three years. The basis of the securities to the Real Partnership was $40,000, and the sales price to Malcolm was $100,000. On his 2015 federal income tax return, Malcolm should report income in the amount and character of

a. $36,000 long-term capital gain.

b. $36,000 short-term capital gain.

c. $36,000 ordinary income.

d. $18,000 long-term capital gain.

e. $18,100 ordinary income.

6. Bobbie and Fran are partners in the Quick Freeze partnership, owning respectively 60 percent and 40 percent of the partnership's capital and profits. At the beginning of the 2014, their bases in their partnership interests were $18,000 and $12,000, respectively. During the year, the partnership had the following items of income: partnership ordinary income, $30,000; long-term capital gains, $10,000; and tax-exempt income from municipal bond interest, $5,000. The partnership distributed $8,000 to Bobbie and $12,000 to Fran. Their respective bases in their partnership interests at the end of 2014 were:

a. Bobbie: $45,000; Fran: $30,000

b. Bobbie: $42,000; Fran: $28,000

c. Bobbie: $37,000; Fran: $18,000

d. Bobbie: $34,000; Fran: $16,000

e. Bobbie: $33,000; Fran: $22,000