Barack and Michelle are both 25% owner/managers for Obama Enterprises.  Barack runs the retail store in Little Rock, AR.  Michelle runs the retail store in Fayetteville, AR.  Obama Enterprises generated a $135,000 profit companywide made up of a $75,000 profit from the Little Rock store, a ($25,000) loss from the Fayetteville store, and a combined $85,000 profit from the remaining stores.  If Obama Enterprises is taxed as a partnership and decides that Barack and Michelle will be allocated 70% of their own store’s profit with the remaining profits allocated pro rata among all the owners, how much income will be allocated to Barack?

Millard transfers an asset having a FMV of $200,000 and an adjusted basis of $150,000 to Fillmore Corporation in a §351 transaction. Millard receives in exchange Fillmore common stock having an FMV of $175,000 and White House Corporation common stock (a capital asset) having a FMV of $25,000 and a basis of $10,000 to Fillmore Corporation. Fillmore Corporation must recognize

Rutherford sells his 20% interest in Hayes Corporation (an S corporation) to Lucy on January 30, 2025. Using the daily allocation method, how much income does Rutherford report if Hayes Corporation earned $200,000 from January 1, 2025 to January 29, 2025 (29 days) and $1,460,000 from January 30, 2025 through December 31, 2025?

The Johnson Partnership balance sheet (cash method) includes the following assets on December 31, 2025. Which of Johnson’s assets are considered hot assets?      Basis FMV   Cash $ 180,000 $ 180,000   Accounts receivable            -0-      60,000   Equipment (cost = $100,000)      40,000      50,000   Land      90,000    120,000       Total $ 310,000 $ 410,000   

On the first day of the partnership’s tax year, James purchases a 40% interest in Madison Partnership for $30,000 cash. The partnership has $40,000 in liabilities when James enters the partnership. Partners share the risk of loss from liabilities in the same way they share partnership income and losses. During 2025, the partnership incurs a $150,000 loss and a $20,000 increase in liabilities. How much of the loss can James report on his tax return for 2025?

James, a contractor, builds an office building for Monroe Partnership in exchange for a capital and profits interest in the partnership worth $500,000. Which of the following statements is correct?

Thomas owns a 35% interest in Jefferson Partnership. On January 1, 2025 Thomas had a basis in his partnership interest of $5,000. For 2025 Jefferson Partnership reported the following items. What is Thomas’s outside basis after adjustment for his share of these items?    Ordinary business income $ 100,000   §1231 gain     15,000   Charitable contributions     25,000   Tax-exempt income       3,000   Additional Jefferson Partnership bank loan     12,000   

Franklin is a 50% partner in the Pierce Partnership and has an outside basis of $26,000 at the end of the year prior to any distributions. On December 31, Franklin receives a proportionate operating distribution of $16,000 cash and a parcel of land with a $24,000 fair value and an $18,000 basis to Pierce. What is Franklin’s basis in the distributed property?

The Polk Partnership balance sheet (cash method) includes the following assets on December 31, 2025. James, a 1/3 partner, has an adjusted basis of $90,000 for his partnership interest. If James sells his entire partnership interest to Sarah for $100,000 cash, what is the amount and character of James’s gain or loss from the sale?      Basis FMV   Cash $ 180,000 $ 180,000   Accounts receivable -0- 60,000   Land     90,000   120,000       Total $ 270,000 $ 360,000   

Martin has a 30% interest in the Van Buren Partnership and receives a guaranteed payment of $30,000. In 2025, Van Buren reports ordinary income of $25,000 and capital gains of $60,000 before taking into account Martin’s guaranteed payment. What is the amount and character of all income or loss that Martin must report as a result of partnership activities?