1. Rachael and Ray form an equal partnership R&R on January 1, 20X1. Rachael contributes $100,000 in exchange for her one-half interest; Ray contributes land worth $100,000. Ray’s adjusted basis in the land is $30,000. Ray is a real estate developer, and at the time of the contribution, the land was inventory in his hands. The land is a capital asset in the hands of R&R. If R&R sells the land in 20X7 for $180,000,a. R&R will recognize $150,000 of capital gain.b. R&R will recognize $150,000 of ordinary income.c. R&R will recognize $80,000 of ordinary income and $70,000 of capital gain.d. R&R will recognize $80,000 of ordinary income.e. R&R will recognize $80,000 of capital gain.2. At January 1, 2015, Jody’s basis in her partnership interest was $25,000. Her share of partnership items for the year is as follows: dividend income of $6,000 and an ordinary loss of $48,000. She received a distribution from the partnership of $15,000 during the year. She must report the following related to these transactions.a. Dividend income of $6,000, a nontaxable distribution of $15,000, an ordinary loss of $10,000, and a suspended loss of $38,000.b. Dividend income of $6,000, an ordinary loss of $31,000, a suspended loss of $17,000, and a taxable distribution of $15,000.c. Dividend income of $6,000, a nontaxable distribution of $15,000, an ordinary loss of $16,000, and a suspended loss of $32,000.d. Dividend income of $6,000, an ordinary loss of $48,000 and a nontaxable distribution of $15,000.e. Dividend income of $6,000, an ordinary loss of $48,000 and a taxable distribution of $15,3. Wayne owns 60 percent and Larry owns 40 percent of the profits and losses of the WL partnership. On January 1, 20X4, the basis in their respective partnership interests is $60,000 and $10,000. During 20X4, WL reports taxable ordinary income of $50,000 and has the following separately stated items: qualified dividend income of $1,000; taxable interest income of $2,600; charitable contributions of $3,000; and Sec. 179 expense of $20,000. During the year, partnership liabilities decreased by $25,000 and there were no distributions made to either partner (assume liabilities are allocated based on profit and loss sharing ratios). On December 31, 20X4, which of the following correctly states the basis in each partner’s interest in WL?a. Wayne: $63,360 and Larry: $12,240b. Wayne: $65,520 and Larry: $12,680c. Wayne: $90,360 and Larry: $30,240d. Wayne: $92,160 and Larry: $31,440
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