Income Tax Fundamentals 2020
38th Edition
ISBN: 9780357391129
Author: WHITTENBURG
Publisher: Cengage
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Question
Chapter 10, Problem 15MCQ
To determine
Introduction:
To choose: The situation in which a partnership will not close its tax year early.
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Students have asked these similar questions
A partner who retires voluntarily from the partnership is not entitled to profit share for that year.
A) True
B) False
Moe, Edita, and Hunter have been operating a business together as partners without a partnership agreement for several years. Hunter unexpectedly passes away, what will most likely become of the partnership?
A. The partnership will be immediately dissolved
B. Hunter’s interest will automatically be divided between Moe and Edita
C. Moe and Edita will need to find a new partner to take Hunter’s place
D. Moe and Edita will be able to purchase Hunter’s interest from his estate
Which of the following statements regarding partnership is incorrect?
a. Changes in the relationship of the partners may dissolve the partnership.
b. The contributions of the partners to business are owned by the partnership.
c. A partnership has a separate legal identity.
d. A partnership is said to have an unlimited life because its legal life of 50 years can be renewed for an indefinite number of renewals.
Chapter 10 Solutions
Income Tax Fundamentals 2020
Ch. 10 - Which of the following may not be treated as a...Ch. 10 - Prob. 2MCQCh. 10 - Prob. 3MCQCh. 10 - Prob. 4MCQCh. 10 - Prob. 5MCQCh. 10 - Prob. 6MCQCh. 10 - Abigail contributes land with an adjusted basis of...Ch. 10 - Prob. 8MCQCh. 10 - Prob. 9MCQCh. 10 - Prob. 10MCQ
Ch. 10 - Prob. 11MCQCh. 10 - Prob. 12MCQCh. 10 - Prob. 13MCQCh. 10 - Prob. 14MCQCh. 10 - Prob. 15MCQCh. 10 - Prob. 16MCQCh. 10 - Kendra is an attorney and owns 60 percent of a law...Ch. 10 - Prob. 18MCQCh. 10 - In 2019, Gloria, a single taxpayer, receives a...Ch. 10 - Prob. 20MCQCh. 10 - Prob. 21MCQCh. 10 - Prob. 22MCQCh. 10 - Prob. 23MCQCh. 10 - Prob. 1PCh. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - Prob. 4PCh. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 9PCh. 10 - Prob. 10PCh. 10 - Prob. 11PCh. 10 - Prob. 12PCh. 10 - Prob. 13PCh. 10 - Prob. 14PCh. 10 - Prob. 15PCh. 10 - Prob. 16P
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- When a more than fifty percent (50%) Partner sells his entire interest in a Partnership to an unrelated third party: O The tax year closes with respect to neither that Partner nor the Partnership. O The tax year closes with respect to both that Partng and the Partnership. O The tax year closes with respect to the Partnership only. O The tax year closes with respect to that Partner only.arrow_forwardGrell, Hamilton, Kieffer, and Mally have been operating a consulting business as a partnership. Based on the provisions of the original articles of partnership, all profits and losses have been allocated on a 4:2:2:2 ratio, respectively. The partners have had difficulty agreeing which clients to pursue and decided they could no longer work together. As a result, they decided to liquidate the partnership. They ceased operations on December 31, 2019. The partnership balance sheet reflects the following: GHKM Consulting Balance Sheet December 31, 2019 $ 20,000 Accounts Payable $ 10,000 20,000 95,000 20,000 25,000 30,000 $200,000 Cash Accounts Receivable 100,000 Bank Loan Payable 80,000 Grell, Capital Hamilton, Capital Kieffer, Capital Mally, Capital $200,000 Total Liabilities & Capital Office Furniture, net Total Assets The partnership anticipates they will incur $5,000 of costs to liquidate their noncash assets.arrow_forwardWhat is the difference in treatment when an incoming partner purchases an interest by agreeing to perform services for the partnership and the partnership (1) gives a 25 percent interest in the capital of the partnership, (2) gives a 25 percent interest in the future income of the partnership, or (3) gives a 25 percent interest in the partnership's future income which the incoming partner must forfeit if the partnership, as reconstituted after the incoming partner's admission, is unable to earn an average of $100,000 profit for the ensuing five years?arrow_forward
- Prior to liquidating their partnership, Bonilla and Perez had capital accounts of $185,000 and $245,000, respectively. The partnership assets were sold for $30,000. The partnership had no liabilities. Bonilla and Perez share income and losses equally.a. Determine the amount of Bonilla’s deficiency.b. Determine the amount distributed to Perez, assuming that Bonilla is unable to satisfy the deficiency.arrow_forwardWhich of the following would likely result to dissolution of a partnership? Partners realize that the profit figures have failed to reach projected levels The partners decided to diversify their business operations. One of the partners permanently withdrew 50% of his capital ownership. Partners are incompatible and choose to cease operationsarrow_forwardThe partnership of Winn, Xie, Yang, and Zed has the following balance sheet: Zed is personally insolvent, and one of his creditors is considering suing the partnership for the $10,000 that is currently owed. The creditor realizes that this litigation could result in partnership liquidation and does not wish to force such an extreme action unless Zed is reasonably sure of obtaining at least $10,000 from the liquidation. Determine the amount for which the partnership must sell the other assets to ensure that Zed receives $10,000 from the liquidation. Liquidation expenses are expected to be $30,000.arrow_forward
- Masters, Hardy, and Rowen are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are Masters, $16,100, Hardy, $16,100, Rowen, $(3,100). After all the assets are sold and liabilities are paid, but before any contributions to cover any deficiencies, there is $29,100 in cash to be distributed. Rowen pays $3,100 to cover the deficiency in his account. The general journal entry to record the final distribution would be:arrow_forward1. A partnership has four equal partners who share profits and losses in accordance with their respective interests. It has $400,000 in taxable income but doesn't distribute any cash to the partners. a. What amount of income will the partnership report on its tax return? None. There is no business income tax on a partnership. b. What amount of the partnership's taxable income will be subject to tax at the partnership level? c. Will each partner recognize taxable income from their interest in the partnership? If so, how much? d. If ABC was a corporation with four equal owners, how would this change your answers in parts (a)- (c)?arrow_forwardPeters, Chong, and Aaron are dissolving their partnership. Therr partnership agreement allocates each partner an equal share of all Income and losses. The current period'sending capral account balances are Peters, $174,000, Chong, $162,000, and Aaron, $(66.000). After all assets are sold and liabilties are pald, there is $270,000 in cash to be distrbuted. Aaron Is unable to pay the deficiency, The Joumal entry to record the distribution should be: O Debit Cash $27o.ooo: credit Peters, capital $9o,ooo: credit Chong. Capital s9o.ooo. O Debit Peters, Capital $174.ooo: debit Chong, Capital $162,ooo: credit Cash $336,0oo. o Debit Cash $27o.ooo, debit Aaron, Capital $66,000, credit Peters, Capital $174,0oo, credit Chong, Capital $162,ooo. O Debit Peters, Capital $174, ooo; debit Chong, Capital $96,ooo: credit Cash $27o,ooo. O Debit Peters, Capital $141.ooo: debit Chong. Capital $129,000; credit Cash $27o,oooarrow_forward
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