1. Generally, a partnership does not pay tax on its income but "passes through" any profits or losses to its partners.
True False
2. An entity formed under state law by filing articles of organization where none of the members are personally liable for its debts.
a. Partnership.
b. Sole
Proprietorship.
c.
Limited Liability Company (LLC).
d. None
of the above.
3. Members of a family can be partners. However, family members (or any other person) will be recognized as partners only if
a. (If capital is a material income-producing factor) they acquired their
capital interest in a bona fide transaction, (even if by gift or purchase from
another family member), actually own the partnership interest, and actually
control the interest.
b. (If
capital is not a material income-producing factor) they joined together in good
faith to conduct a business.
c.
They agreed that contributions of each entitle them to share in the profits, and
some capital or service has been (or is) provided by each partner.
d. All
of the above.
4. A capital interest in a partnership is an interest in its assets that is distributable to the owner of the interest when
a. The owner withdraws from the partnership.
b. The
partnership liquidates.
c.
The right to share in earnings and profits.
d.
Both A and B above.
5. An organization formed after 1996 is classified as a partnership for federal tax purposes if it has two or more members and is
a. An insurance company.
b. A
tax-exempt organization.
c. A
real estate investment trust.
d.
None of the above.
6. A qualified entity is a business entity that meets the following requirement
a. The business entity is wholly owned by a husband and wife as community
property under the laws of a state, a foreign country, or a possession of the
United States.
b. No
person other than one or both spouses would be considered an owner for federal
tax purposes.
c.
The business entity is not treated as a corporation.
d. All
of the above.
7. A partnership terminates when
a. All its operations are discontinued and not part of any business, financial
operation, or venture is continued by any of its partners in a partnership.
b. At
least 50% of the total interest in the partnership capital and profits is sold
or exchanged within a 12-month period, including a sale or exchange to another
partner.
c.
You sell or exchange 50% or more of the partnership interest within a 12-month
period.
d.
Both A and B above.
8. If a partnership is terminated before the end of the tax year, Form 1065 must be filed for the short period, which is the period from the beginning of the tax year through the date of termination. The return is due
a. The 15th day of the fourth month following the date of termination.
b. The
15th day of the 3rd month following the date of termination.
c.
The 15th day of the 5th month following the date of termination.
d.
None of the above.
9. Certain partnerships that do not actively conduct a business can choose to be completely or partially excluded from being treated as partnerships for federal income tax purposes. All of the partners must agree to make the choice, and
a. The partners must be able to compute their own taxable income without
computing the partnership's income.
b. The
partners are not exempt form the rule that limits a partner's distributive share
of partnership loss to the adjusted basis of the partner's partnership interest.
c.
The partners are not exempt from the requirement of a business purpose for
adopting a tax year for the partnership that differs from its required tax year.
d. Any
of the above.
10. An investment partnership can be excluded if the participants in the joint purchase, retention, sale, or exchange of investment property
a. Own the property as co-owners.
b.
Reserve the right separately to take or dispose of their shares of any property
acquired or retained.
c. Do
not actively conduct business or irrevocably authorize some person acting in a
representative capacity to propose, sell, or exchange the investment property.
d. All
of the above.
11. An operating agreement partnership group can be excluded if the participants in the joint production, extraction, or use of property
a. Own the property as co-owners, either in fee or under lease or other form of
contract granting exclusive operating rights.
b.
Reserve the right separately to take in kind or dispose of their shares of any
property produced, extracted, or used.
c. Do
not jointly sell services or the property produced or exchanged.
d. All
of the above.
12. A partnership distribution includes
a. A
withdrawal by a partner in anticipation of the current year's earnings.
b. A
distribution of the current year's or prior year's earnings not needed for
working capital.
c. A
complete or partial liquidation of a partner's interest or a distribution to all
partners in a complete liquidation of the partnership.
d.
Any of the above.
13. The relationship between two or more persons who join to carry on a trade or business, with each person contributing money, property, labor, or skill and each expecting to share in the profits and losses of the business whether or not a formal agreement is made.
a.
Proprietorship.
b.
Corporation.
c.
Limited Liability Company.
d.
Partnership.
14. A partnership that is not created or organized in the United States or under the law of the United States or of any state.
a.
Limited Partnership.
b. Foreign Partnership.
c. Limited Liability Partnership.
d.
Domestic Partnership.
15. A foreign partnership required to file a return generally must report all of its foreign and U.S. source income. A foreign partnership with U.S. partners with U.S. source income is not required to file Form 1065 if
a.
The partnership had no effectively connected income (ECI) during its tax year.
b. The partnership had U.S. source income of $20,000 or less during the tax
year, and less than 1% of the partnership item of income, gain, loss, deduction,
or credit was allocable in the aggregate to direct U.S. partner's at any time
during its tax year.
c. The partnership is not a withholding foreign partnership.
d.
All of the above.
16. A foreign partnership required to file a return generally must report all of its foreign and U.S. source income. A foreign partnership with no U.S. partners with U.S. source income is not required to file Form 1065 if
a.
The partnership had no EIC during its tax year and it had no U.S. partners at
any time during its tax year.
b. All required Forms 1042 and 1042-S were filed by the partnership or another
withholding agent.
c. The tax liability of each partner for amounts reportable has been fully
satisfied by the withholding of tax at the source and the partnership is not a
withholding foreign partnership.
d.
All of the above.
17. Certain partnerships are required to file Form 1065, Schedules K-1, and related forms and schedules electronically if the partnership has
a.
More than 50 partners.
b. More than 100 partners.
c. More than 150 partners.
d.
More than 300 partners.
18. The option to file electronically does not apply to certain returns, such as
a. Bankruptcy returns.
b.
Returns with pre-computed penalty and interest.
c. Returns with reasonable cause of failing to file timely.
d. All of the above.
19. An accounting method is a set of rules used to determine when and how income and expenditures are reported. Generally, a permissible method is
a. Cash
method.
b.
Accrual method.
c. Any method authorized by the Internal Revenue Code.
d. Any
of the above.
20. Generally, a partnership may not use the cash method of accounting if
a. It has at least one corporate partner.
b. It has average annual gross receipts of more than $5 million, and it is not a
farming business.
c. It is a tax shelter.
d. Any
of the above.
21. The partnership should keep copies of all returns it has filed. They help in preparing future returns and in making computations when filing an amended return.
True False
22. The basis to the partnership of property contributed by a partner is the adjusted basis in the hands of the partner at the time it was contributed, plus any gain recognized by the partner at that time.
True False
23. Generally, the partnership is required to prepare and give a Schedule K-1 to each person who was a partner in the partnership at any time during the year. Schedule K-1 must be provided to each partner
a. No later than
January 31, 2008.
b. On or before
April 15, 2008.
c. On or before the
day on which the partnership return is required to be filed.
d. The 15th day
of the 4th month after the end of your fiscal year if you use a fiscal year.
24. Guaranteed payments to partners are
a. Payments for
salaries, health insurance, and interest deducted by the partnership and
reported on Form 1065; Form 8825; or Schedule K-1.
b. Compensation
deferred under a Section 409A nonqualified deferred compensation plan that does
not meet the requirements of Section 409A reported on line 20c of Schedule K-1.
c. Payments the
partnership must capitalize.
d. All of the above.
25. Generally, total assets at the beginning of the year (Schedule L, line 14, column (b)) must be equal total assets at the close of the prior tax year (Schedule L, line 14, column (d)). If total assets at the beginning of the year do not equal total assets at the close of the prior year,
a. You should amend your prior year return.
b. Attach a
statement explaining the difference.
c. There is an
obvious mistake, so you must recheck your work and not send your return until it
is correct.
d. None of the
above.
26. Every domestic partnership must file Form 1065 even if it does not receive income or incurs any expenditures treated as deductions or credits for federal income tax purposes.
True False
27. Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed to the partner by a partnership is
a. The basis of
the property to the partner that is more than the adjusted basis of his or her
interest in the partnership reduced by any money received in the same
transaction.
b. Its
adjusted basis to the partnership immediately before the distribution.
c. Its adjusted
basis to the partnership immediately after the distribution.
d. Either A or B
above.
28. A partner's basis in a partnership interest includes the partner's share of a partnership liability only if, and to the extent that, the liability
a. Creates or increases the partnership's basis.
b. Gives rise to a current deduction to the partnership.
c. Is a nondeductible, noncapital expense of the partnership.
d. All of the above.
29. A loss incurred from the abandonment or worthlessness of a partnership interest is an ordinary loss if
a. The transaction is not a sale.
b. The transaction is not a an exchange.
c. The partner has not received an actual or deemed distribution from the
partnership.
d. All of the above.
30. The partnership agreement includes the original agreement and any modifications. The modifications must be agreed to by all partners or adopted in any other manner provided by the partnership agreement. The agreement or modifications
a. Must be
written.
b. Cannot be oral.
c. Can be oral or
written.
d. Must be drawn
by an attorney.
31. For taxable years beginning on or after January 1, 2008, domestic limited partnerships whose certificates of limited partnerships have been canceled may revive by filing a certificate of revival with the California Secretary of State.
True False
32. A limited partnership is still required to file if it is registered in California and
a. It is not
doing business in California.
b. It does not
have California Source Income.
c. It is organized
in another state.
d. Both A and B
above.
33. Limited partnerships and LLPs (both foreign and domestic) doing business in California, that have a certificate on file, or are registered with the California Secretary of State (whether or not doing business in California) must file a return and pay
a. $1,500 annual
tax.
b. $800 annual
tax.
c. $200 annual
tax.
d. $600 annual
tax.
34. Every partnership must file information returns if, in the course of its trade or business
a. The
partnership makes payments of rents, salaries, wages, annuities, or other fixed
or determinable income during one taxable year totaling $600 or more to one
person.
b. The partnership
pays an individual or one payee interest and dividends totaling $10 or more.
c. The partnership
receives cash payments over $10,000.
d. Any of the
above.
35. A partnership must file Form 565 and pay $800 annual tax (if required). The $800 annual tax applies to all LLCs, LPs, LLPs and REMICs, if
a. It is doing
business in California.
b. It is
registered in California.
c. It is organized
in California.
d. All of the
above.
36. For LPs, LLPs, and REMICs that must pay the $800 annual tax with Form 565, a penalty for late payment of tax may be assessed. If the organization fails to pay the $800 annual tax by the original due date is assessed a penalty of ________, plus 0.5% for each month or part of month (not to exceed 40 months) the tax remains unpaid.
a. 2% of the
unpaid tax.
b. 5% of the
unpaid tax.
c. 3% of the
unpaid tax.
d. 10% of the
unpaid tax.
37. These regulations allow certain unincorporated entities to choose tax treatment as a partnership, a corporation, or an entity disregarded as separated from its owner. These regulations are commonly knows as
a.
"Check-the-box" regulations.
b. "Eligible
entity" regulations.
c. "Business
entity" regulations.
d. None of
the above.
38. Regardless of the classification of income for federal purposes, income from California sources is determined in accordance with California law. California source business income of a trade or business is determined by apportionment, if the partnership conducts
a. A trade or
business wholly within California, the income from that trade or business is
California source income.
b. A business
within and outside California, but the part within California is so separate and
distinct that it can be separately accounted for, then only that separate income
within California is California source income.
c. A single trade
or business within and outside California.
d. Any of the
above.
39. The partnership uses _________ to report your distributive share of the partnership's income, deductions, credits, etc.
a. Schedule R-1
(Form 565).
b. Schedule K-1
(Form 565).
c. Schedule 3
(Form 565).
d. Schedule D
(Form 565).
40. Certain income that may be portfolio income for federal purposes may be business income for California sourcing purposes.
True False