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?

Grover transferred property with a basis of $200,000 and a fair market value of $310,000 to Cleveland Corporation in exchange for stock with a fair market value of $160,000 and $100,000 in cash in an exchange that qualifies for §351. Cleveland Corporation assumed a liability of $50,000 on the property. What is the gain realized by Grover?

John, Abigail and Thomas organized Adams Corporation with authorized voting common stock of $100,000. John received 10% of the capital stock in payment for organizational services that he rendered for the benefit of the newly formed corporation. John did not contribute property to Adams. Abigail and Thomas transferred property in exchange for stock as follows: Abigail – $5,000 A/B; $20,000 FMV; 20% of Adams stock acquired Thomas – $60,000 A/B; $70,000 FMV; 70% of Adams stock acquiredWhat amount of gain did Thomas recognize from this transaction?