[jeff]

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Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Tax lady]

Adams, a general contractor, Brinks, an architect, and Carson, an interior decorator, formed the Dex Home Improvement General Partnership by contributing the assets as follows:

Fair % of Partner Share

Adjusted Market in Capital

Asset Basis Value Profits and Losses

---

---

---

---

Adams Cash $40,000 $40,000 50%

Brinks Land $12,000 $21,000 20%

Carson Inventory $24,000 $24,000 30%

The land was a capital asset to Brinks, subject to a $5,000 mortgage, which was assumed by the partnership.

Brinks' initial basis in Dex is:

Select an answer:

A.

$21,000.

B.

$12,000.

C.

$8,000.

D.

$5,000.

REG 8/15/14 (73); 11/13/14 (82)-expired 🙁
AUD 5/30/15 (80)
BEC 11/28/15 (75)
FAR 7/30/16

Studying with CPAexcel and Ninja notes/MCQ's/Flashcards

[Mamabear]

See if Ninja's explanation helps. It must be an AICPA released question if they both have it.

CPA Exam - Finally DONE (November 2014)
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[Tax lady]

That didn't copy over so great.

REG 8/15/14 (73); 11/13/14 (82)-expired 🙁
AUD 5/30/15 (80)
BEC 11/28/15 (75)
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Studying with CPAexcel and Ninja notes/MCQ's/Flashcards

[Mamabear]

C. $12K adjusted basis – $4k (80% of $5K liability distributed to the other partners) = $8K

CPA Exam - Finally DONE (November 2014)
BEC (08/10/13) 80
AUD (08/24/13) 65 (11/13/13) 85
FAR (04/12/14) 81
REG (07/19/14) 69 (11/29/14) 87!!

[Tax lady]

I say C. I know you probably can't tell what is what.

REG 8/15/14 (73); 11/13/14 (82)-expired 🙁
AUD 5/30/15 (80)
BEC 11/28/15 (75)
FAR 7/30/16

Studying with CPAexcel and Ninja notes/MCQ's/Flashcards

[Tax lady]

C is correct.

REG 8/15/14 (73); 11/13/14 (82)-expired 🙁
AUD 5/30/15 (80)
BEC 11/28/15 (75)
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[Mamabear]

Awesome! I just found the section in Wiley that describes the at-risk, passive limitations. Do you want me to read it real quick and see if I can help explain the 3rd one?

CPA Exam - Finally DONE (November 2014)
BEC (08/10/13) 80
AUD (08/24/13) 65 (11/13/13) 85
FAR (04/12/14) 81
REG (07/19/14) 69 (11/29/14) 87!!

[Tax lady]

Sure!

REG 8/15/14 (73); 11/13/14 (82)-expired 🙁
AUD 5/30/15 (80)
BEC 11/28/15 (75)
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Studying with CPAexcel and Ninja notes/MCQ's/Flashcards

[Mamabear]

OK: This is what you posted with some more Wiley explanation behind it.

A partner may deduct his share of partnership losses subject to three levels of limitations:

Level 1: Any deductible loss is limited to the adjusted basis of the partner’s interest in the partnership. (Don't forget to first add in their share of capital gains, etc before you determine the ending basis to apply the deductible loss to)

Level 2: If there is enough adjusted basis to deduct a loss, then the partner is only allowed to deduct the amount of loss for which he is at risk. (After deducting the deductible loss from level 1 AND there is more basis–“A partner's at-risk basis is generally the same as the partner's regular p-ship basis with the exception that liabilities are included in at-risk basis only if the partner is personally liable for such amounts)

Level 3: If there is enough adjusted basis and enough at risk, then the partner applies the passive activity limits.(After deducting the deductible loss from Level 1 AND the liabilities that the partner is personally liable for AND there is still more basis–“Passive activity losses are deductible only to the extent of the partner's income from other passive activities, such as rental activities and being a LIMITED partner in a p-ship”)

CPA Exam - Finally DONE (November 2014)
BEC (08/10/13) 80
AUD (08/24/13) 65 (11/13/13) 85
FAR (04/12/14) 81
REG (07/19/14) 69 (11/29/14) 87!!

[Mamabear]

I'm so confused.

CPA Exam - Finally DONE (November 2014)
BEC (08/10/13) 80
AUD (08/24/13) 65 (11/13/13) 85
FAR (04/12/14) 81
REG (07/19/14) 69 (11/29/14) 87!!

[Mamabear]

Thompson's basis in Starlight P-ship was $60K in the beginning of the year. Thompson materially participates in the p-ship's business. Thompson received $20K in cash distributions during the year. Thompson's share of Starlight's current operations was a $65K ordinary loss and a $15K net long-term capital gain. What is the amount of Thompson's deductible loss for the period?

A $15K

B $40K

C $55K

D $65K

CPA Exam - Finally DONE (November 2014)
BEC (08/10/13) 80
AUD (08/24/13) 65 (11/13/13) 85
FAR (04/12/14) 81
REG (07/19/14) 69 (11/29/14) 87!!

[Tax lady]

Ok, got it. I have updated my notes accordingly. Thanks so much. I've got another question coming.

REG 8/15/14 (73); 11/13/14 (82)-expired 🙁
AUD 5/30/15 (80)
BEC 11/28/15 (75)
FAR 7/30/16

Studying with CPAexcel and Ninja notes/MCQ's/Flashcards

[Mamabear]

I couldn't find any questions pertaining to the passive loss for partnerships so I'm just going to know the list without fully understanding unless someone can come on here and explain it to us. 🙁

CPA Exam - Finally DONE (November 2014)
BEC (08/10/13) 80
AUD (08/24/13) 65 (11/13/13) 85
FAR (04/12/14) 81
REG (07/19/14) 69 (11/29/14) 87!!

[Tax lady]

C?

REG 8/15/14 (73); 11/13/14 (82)-expired 🙁
AUD 5/30/15 (80)
BEC 11/28/15 (75)
FAR 7/30/16

Studying with CPAexcel and Ninja notes/MCQ's/Flashcards

[Mamabear]

YES! — Stop putting question marks. Repeat after me–I will not doubt myself! 🙂

CPA Exam - Finally DONE (November 2014)
BEC (08/10/13) 80
AUD (08/24/13) 65 (11/13/13) 85
FAR (04/12/14) 81
REG (07/19/14) 69 (11/29/14) 87!!

[Author]

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