Order Taxation of Entities Discussion Solutions

Order Taxation of Entities Discussion Solutions
Order Taxation of Entities Discussion Solutions
1. During March of Year 8, Steelman and Schechter contribute cash
equally to form the Glenwood Partnership. Steelman and Schechter
share profits and losses of 75% and 25%, respectively. The Glenwood
Partnership’s ordinary income was $60,000 in Year 8. A distribution of ©
$5,000 was made to Steelman. No distribution was made to Schechter. ©
What is Steelman’s share of taxable income from the Glenwood /
Partnership in Year 8?
(A) $5,000
(B) $30,000
(C) $45,000
(D) $50,000
142. The Daltrey Partnership has sales revenues of $450,000, operating :
expenses of $350,000, dividend revenue of $8,000, charitable contributions ©
of $6,000, and a $12,000 capital loss. Therefore, the partnership has a net
income of $90,000. What is the Daltrey Partnership’s ordinary income for
tax purposes?
(A) $90,000
(B) $100,000
(C) $102,000
(D) $104,000
143. Which is CORRECT regarding partnership tax returns?
I. A partnership tax return is due March 15th, or two and a half
months after year end.
II. Each partner in a partnership is given a Schedule K-1 to report all
items of income and loss on their personal tax returns.
(A) Ionly
(B) Il only
(C) both I and II
(D) neither I nor
42 )» McGraw-Hill Education 500 Regulation Questions for the CPA Exam
144. Which of the following is CORRECT regarding partnership tax returns?
145.
146.
147.
I. No tax is due with the filing of a partnership tax return even if the
partnership earned profits in excess of $50,000.
“IL. A partnership tax return is filed on-Form 1065.
(A) I only ‘
(B) Il only
(C) both I and II pee
( D) neither I nor II
In a partnership, a fixed payment made to a partner for services provided
to the partnership is known as a
I. normal distribution
II. guaranteed payment
(A) Tonly
(B) I only
(C) both I and II
(D) neither I nor II
A guaranteed payment by a partnership to a partner for services rendered
may include an agreement to pay
I. a salary of $15,000 monthly without regard to partnership income
II. a 17% interest in partnership profits
(A) Ionly
(B) Il only
(C) both I and II
(D) neither I nor II
Barry, CPA, is computing the ordinary income of a client’s partnership. A deduction is allowed for
I. contributions to recognized charities
II. short-term capital losses
III. guaranteed payments to partners
(A) Iand III only
(B) I and III only
(C) II only
(D) Tand II only
Taxation of Entities ( 43
Use the following facts to answer Questions 148 and 149: Disston, a 25%
partner in Witness Partnership, received a $40,000 guaranteed payment for
deductible services rendered to the partnership. Guaranteed payments were not
made to any other partner. Witness Partnership income consisted of
Net business income before guaranteed payments $100,000
Net long-term capital gains $10,000
148. How much is ordinary income of the Witness Partnership?
(A) $40,000
(B) $60,000
(C) $100,000
(D) $140,000
149. Disston should report how much income from the Witness Partnership on
his Form 1040?
(A) $20,000
(B) $67,500
(C) $55,000
(D) $57,500
150. The partnership of Marty and Walter sustained an ordinary loss of
$104,000. The partners share profits and losses equally. Walter had an
adjusted basis of $36,000 on December 31, before consideration of the
loss, Walter can deduct what amount on his individual tax return?
(A) ordinary loss of $36,000
(B) ordinary loss of $52,000
(C) ordinary loss of $36,000 and a capital loss of $16,000
(D) capital loss of $52,000
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