3. At the formation of the BD Partnership, Betty contributes land with a basis of $10,000 and a FMV of $20,000 and Bob contributes cash of $20,000. Betty and Bob share profits and losses equally. When the land is sold two years later for $40,000, Betty must recognize a gain of $20,000 $30,000 $10,000 $40,000

4. Ira Grams is a 60% owner of a calendar year Partnership during the tax year. His beginning stock basis is $30,000, and the Partnership reports the following items. Sales $64,000 Short-term capital gain 10,000 Section 1231 Loss 6,000 Tax-exempt interest income 5,000 Cost of Goods Sold 24,000 Operating Expenses 5,000 Distribution to Ira Grams 10,000 Ira's share of the ordinary income is: $26,400 $20,400 $15,000 $21,000 5. Ryan's adjusted basis in the his Lux Partnership interest was $18,000 at the time he received the following nonliquidating distributions of partnership property: Cash of $15,000; Land with an adjusted basis of $14,000, but a fair market value of $30,000. Ryan's taxable gain from the distribution is: $7,000 $15,000 $0 $12,000

9. For some entities, the basis of an ownership interest is increased by the entity profits. Which entity or entities does this apply to? Applies only to a partnership Applies to a corporation Applies to both a partnership and an S Corporation. Applies only to an S Corporation.

10. Sanjay contributes land to a business entity in January 2017 for a 10% ownership interest. Sanjays basis for the land is $80,000, and the fair market value is $100,000. The business entity was formed ten years ago by Polly and Rita, who have equal ownership. Which of the following statements is false? If the entity is a C Corporation, Sanjay will have $20,000 of taxable income If the entity is a partnership, Sanjay will have no recognized income If the entity is a Partnership, Sanjay will have $20,000 of recognized income If the entity is an S Corporation, Sanjay will recognize $20,000 of taxable income