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ACG-3173 Exam 3 Practice Problems (1).
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ACG-3173 Exam 3 Practice Problems (1).
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ACG-3173 Exam 3 Practice ProblemsLemon, Lime, and Orange, three cash method, calendar year individuals, form Starburst
General Partnership to create fruit candies. Before forming this partnership, they each had their
own sole proprietorship. The partners contribute the following property (in each case worth
$3,600 net of liabilities) in exchange for equal 1/3 interests in the partnership's capital, profits
and losses (see the table below of property contributed by each partner). The partnership
assumes all liabilities encumbering the contributed assets. Assume that the partners are
responsible for an equal share of the partnership's liabilities. What is the most that any specific
partner recognizes on these transactions?
Lemon contributes land with a fair market value of $7,740, which is encumbered by a recourse
mortgage of $4,860. Lemon has held the land for several years as an investment, and his basis
in the land is $1,800. Lemon also contributes - ANS-360
Tropical Fruit Partnership is a calendar year general partnership with the following current year
information:
Operating loss $(600,000)
Liabilities:
Note payable, Big Bank 60,000
Note payable, Pineapple (individual) 40,000
On January 1 Coconut bought 60% of Tropical Fruit Partnership for $90,000. How much of the
operating loss may Coconut deduct currently? Assume the excess business loss limitation does
not apply. - ANS-150000
At the formation of Berry Partnership, Straw contributes land with a basis of $185,000 and a fair
market value of $555,000, and Rasp contributes cash of $555,000. Straw and Rasp share
profits and losses equally. When the land is sold two years later for $925,000, Straw must
recognize a gain of how much? - ANS-555000
At the formation of Berry Partnership, Straw contributes land with a basis of $85,000 and a fair
market value of $255,000, and Rasp contributes cash of $255,000. Straw and Rasp share
profits and losses equally. When the land is sold two years later for $425,000, Rasp must
recognize a gain of how much? - ANS-85000
Citrus Corporation is a calendar year S corporation with the following current year information:
Operating loss $(1,500,000)
Liabilities:
Notes payable, Big Apple Bank 250,000
Notes payable, Grapefruit (individual) 250,000
, On January 1, Orange (an individual) bought 50% of Citrus Corporation stock for $375,000.
How much of the operating loss may Orange deduct currently? Assume the excess business
loss limitation does not apply. - ANS-375000
Citrus Corporation is a calendar year S corporation with the following current year information:
Operating loss $(1,560,000)
Liabilities:
Notes payable, Big Apple Bank 390,000
Notes payable, Grapefruit (individual) 260,000
On January 1 Grapefruit bought 60% of Citrus Corporation for $585,000. She then loaned Citrus
Corporation $260,000 (the amount above under liabilities). How much of the operating loss may
Grapefruit deduct currently? Assume the excess business loss limitation does not apply. -
ANS-845000
Dried Fruit Corp. has had a valid S Corp election in effect at all times since its incorporation. The
Dried Fruit Corp. stock is owned one-third by Raisin and two-thirds by Prune. All shareholders
are US resident citizen individuals. At the beginning of the current year, Raisin's basis in his
shares was $72,000 and Prune's basis in her shares was $24,000. During the current year,
Dried Fruit Corp. earned $432,000 of net income from operations. Raisin's share was $144,000;
Prune's share was $288,000. On July 1st, Dried Fruit Corp. distributed $192,000 to Raisin and
$384,000 to Prune. How much gain does Raisin recognize as a result of this transaction? -
ANS-0
Dried Fruit Corp. has had a valid S Corp election in effect at all times since its incorporation. The
Dried Fruit Corp. stock is owned one-third by Raisin and two-thirds by Prune. All shareholders
are US resident citizen individuals. At the beginning of the current year, Raisin's basis in his
shares was $99,000 and Prune's basis in her shares was $33,000. During the current year,
Dried Fruit Corp. earned $594,000 of net income from operations. Raisin's share was $198,000;
Prune's share was $396,000. On July 1st, Dried Fruit Corp. distributed $264,000 to Raisin and
$528,000 to Prune. How much gain does Prune recognize as a result of this transaction? -
ANS-99000
Dried Fruit Corp. has had a valid S Corp election in effect at all times since its incorporation. The
Dried Fruit Corp. stock is owned one-third by Raisin and two-thirds by Prune. All shareholders
are US resident citizen individuals. At the beginning of the current year, Raisin's basis in his
shares was $114,000 and Prune's basis in her shares was $38,000. During the current year,
Dried Fruit Corp. earned $684,000 of net income from operations. Raisin's share was $228,000;
Prune's share was $456,000. On December 31st, Dried Fruit Corp. distributed Grapeacre (real
property) having a fair market value of $228,000, and a basis of $152,000, to Raisin and
Plumacre (real property) having a fair market value of $456,000 and a basis of $418,000, to
Prune. How much gain does Raisin recognize as a result of this transaction? - ANS-38000
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