For partners a pre-contribution gain or loss, a. Must satisfy the economic effect for partner allocations and reporting b. Must satisfy the substantiality effect for partner allocations and reporting c. Must be allocated to all partners upon a sales transaction d. Must be allocated to take into account the variation between the basis of the property and its fair market value on the date of contribution e. All of the above Question 2 Rosie is a partner in the Cardinal Partnership, which is not publicly traded. Her allocable share of Cardinal?s passive ordinary losses from a nonrealty activity for the current year is ($100,000). Rosie has a $60,000 adjusted basis (outside basis) for her interest in Cardinal (before deduction of any of the passive losses). Her amount ?at risk? under 465 is $45,000 (before deduction of any of the passive losses). She also has $30,000 of passive income from other sources. How much of the $100,000 passive loss allocated to her can Rosie deduct on her current year?s tax return? a. $30,000 b. $45,000 c. $60,000 d. $100,000 e. None of the above Question 3 In the current year, Raquel formed an equal partnership with Kristen. Raquel contributed land with an adjusted basis of $150,000 and a fair market value of $250,000. Raquel also contributed $100,000 cash to the partnership. Kristen contributed land with an adjusted basis of $150,000 and a fair market value of $200,000. The land contributed by Raquel was encumbered by a $150,000 nonrecourse debt. Assume the partners share debt equally. Immediately after the formation, the basis of Raquel?s partnership interest is: a. $0 b. $100,000 c. $175,000 d. $225,000 e. None of the above. Question 4 When pass-through entities conduct activities eligible for the DPAD, special rules apply. Which of the following DPAD partnership rule is incorrect? a. Guaranteed payments to partners qualify as W-2 wages. b. On Schedule K-1, each partner is allocated a share of the amounts needed to calculate the DPAD, such as QPAI and W-2 wages related to domestic production activities. c. The actual DPAD is calculated at the partner level. d. Whether an activity qualifies for the DPAD is determined at the entity level. e. None of the above. Question 5 A partnership has ordinary income of $180,000 after total guaranteed payments deduction of $240,000. Partner Abe has a 40% share of the profits in a partnership and is guaranteed $5,000 per month. What is Abe?s guaranteed payment and share of profits for the year? a. $60,000 guaranteed payment, and $168,000 share of profits b. $72,000 guaranteed payment, and $60,000 share of profits c. $60,000 guaranteed payment, and $72,000 share of profits d. $96,000 guaranteed payment, and $72,000 share of profits e. None of the above. Question 6 Manuel and Becky formed an equal partnership on June 1 of the current year. Manuel contributed $29,000 cash and land with a basis of $6,000 and a fair market value of $15,000. Becky contributed equipment with a basis of $35,000 and a value of $40,000. Manuel's tax basis in his interest is $35,000; Becky's tax basis is also $35,000. True False Question 7 Montana is a real estate developer and owns property that is treated as inventory (not a capital asset) in her business. She contributed a parcel of this land (basis $40,000; fair market value $48,000) to a partnership, which will be held as an investment. After three years, the partnership sells the land for $60,000. The partnership will recognize a $20,000 capital gain on sale of the property. True False Question 8 The facts for this question will be used to answer this question as well number 9 and 10. Jane is a partner in the Cherize Partnership, which is not publicly traded. Jane shares a 50% interest in the profits and losses of Cherize. Cherize?s passive ordinary losses from a nonrealty activity for the current year is ($800,000). Jane has a $250,000 adjusted basis (outside basis) for her interest in Cherize (before deduction of any of the passive losses). Her adjusted basis includes nonrecourse debt. Her amount "at risk" under 465 is $100,000 (before deduction of any of the passive losses). She also has $120,000 of passive income from other sources. How much of the passive loss allocated to her can Jane deduct on her current year's tax return? Question 9 Using the same facts in 8 above, how much of a loss does Jane have to suspend? Question 10 Using the same facts as in 8 above, what amount of nonrecourse debt was included in Jane?s adjusted basis?

For partners a pre-contribution gain or loss, a. Must satisfy the economic effect for partner allocations and reporting b Must satisfy the substantiality effect for partner allocations and reporting . c. Must be allocated to all partners upon a sales transaction d Must be allocated to take into account the variation between the basis of the . property and its fair market value on the date of contribution e. All of the above Question 2 Rosie is a partner in the Cardinal Partnership, which is not publicly traded. Her allocable share of Cardinal's passive ordinary losses from a nonrealty activity for the current year is ($100,000). Rosie has a $60,000 adjusted basis (outside basis) for her interest in Cardinal (before deduction of any of the passive losses). Her amount \"at risk\" under 465 is $45,000 (before deduction of any of the passive losses). She also has $30,000 of passive income from other sources. How much of the $100,000 passive loss allocated to her can Rosie deduct on her current year's tax return? a. $30,000 b $45,000 . c. $60,000 d $100,000 . e. None of the above Question 3 In the current year, Raquel formed an equal partnership with Kristen. Raquel contributed land with an adjusted basis of $150,000 and a fair market value of $250,000. Raquel also contributed $100,000 cash to the partnership. Kristen contributed land with an adjusted basis of $150,000 and a fair market value of $200,000. The land contributed by Raquel was encumbered by a $150,000 nonrecourse debt. Assume the partners share debt equally. Immediately after the formation, the basis of Raquel's partnership interest is: a. $0 b $100,000 . c. $175,000 d $225,000 . e. None of the above. Question 4 When pass-through entities conduct activities eligible for the DPAD, special rules apply. Which of the following DPAD partnership rule is incorrect? a. Guaranteed payments to partners qualify as W-2 wages. b On Schedule K-1, each partner is allocated a share of the amounts needed to . calculate the DPAD, such as QPAI and W-2 wages related to domestic production activities. c. The actual DPAD is calculated at the partner level. d Whether an activity qualifies for the DPAD is determined at the entity level. . e. None of the above. Question 5 A partnership has ordinary income of $180,000 after total guaranteed payments deduction of $240,000. Partner Abe has a 40% share of the profits in a partnership and is guaranteed $5,000 per month. What is Abe's guaranteed payment and share of profits for the year? a. $60,000 guaranteed payment, and $168,000 share of profits b $72,000 guaranteed payment, and $60,000 share of profits . c. $60,000 guaranteed payment, and $72,000 share of profits d $96,000 guaranteed payment, and $72,000 share of profits . e. None of the above. Question 6 Manuel and Becky formed an equal partnership on June 1 of the current year. Manuel contributed $29,000 cash and land with a basis of $6,000 and a fair market value of $15,000. Becky contributed equipment with a basis of $35,000 and a value of $40,000. Manuel's tax basis in his interest is $35,000; Becky's tax basis is also $35,000. True False Question 7 Montana is a real estate developer and owns property that is treated as inventory (not a capital asset) in her business. She contributed a parcel of this land (basis $40,000; fair market value $48,000) to a partnership, which will be held as an investment. After three years, the partnership sells the land for $60,000. The partnership will recognize a $20,000 capital gain on sale of the property. True False Question 8 The facts for this question will be used to answer this question as well number 9 and 10. Jane is a partner in the Cherize Partnership, which is not publicly traded. Jane shares a 50% interest in the profits and losses of Cherize. Cherize's passive ordinary losses from a nonrealty activity for the current year is ($800,000). Jane has a $250,000 adjusted basis (outside basis) for her interest in Cherize (before deduction of any of the passive losses). Her adjusted basis includes nonrecourse debt. Her amount "at risk" under 465 is $100,000 (before deduction of any of the passive losses). She also has $120,000 of passive income from other sources. How much of the passive loss allocated to her can Jane deduct on her current year's tax return? Question 9 Using the same facts in 8 above, how much of a loss does Jane have to suspend? Question 10 Using the same facts as in 8 above, what amount of nonrecourse debt was included in Jane's adjusted basis