Part 1:

List at least 3 common separately stated items. Explain why they must be separately stated to the partners.

Is the character of partnership income/gains and expenses/losses determined at the partnership or partner level? Why?

Kaylyn, Aleeah, Bentley, and Carter LLC each own a 25 percent interest in Bjorn Industries LLC, which generates annual gross receipts of over $100 million. Kaylyn, Aleeah, and Bentley manage the business, but Carter LLC is a non-managing member. Although Bjorn Industries has historically been profitable, for the last three years, losses have been allocated to the members. Given these facts, the members want to know whether Bjorn Industries can use the cash method of accounting. Why or why not?

Part 2:

Explain why a new partner who pays more for a partnership interest than the selling partners outside basis would want the partnership to elect a special basis adjustment?

Why might a partnership not want to make a 754 election to allow special basis adjustments? Explain in detail.