Multiple choice
1. On August 31, 2011, Roberta acquired a 20 percent interest in Zelkova Company, a partnership, by contributing property with an adjusted basis of $8,500 and a fair market value of $15,000. The property was subject to a mortgage of $10,000, which was assumed by Zelkova Company. What is Roberta’s basis in her partnership interest in Zelkova Company immediately after the partnership contribution?
A) $6,500
B) $500
C) $8,500
D) $3,000
E) $7,000
2.John owns a 20 percent interest in J&B Interests, a partnership. His brother, Brian, owns a 35 percent interest in that same partnership, and the remaining 45 percent is owned by an unrelated individual. During 2011, John sells a classic automobile from his personal collection with a basis of $80,000 to J&B Interests for $110,000. The partnership intends to hold the auto as part of its inventory for resale. What is the amount and nature of John’s gain or loss on this transaction?
A) $0 gain or loss
B) $24,000 ordinary income
C) $30,000 long-term capital gain
D) $30,000 long-term capital loss
E) $30,000 ordinary income
3. Roger is a 51 percent partner of Ralph & Associates. Roger sells a building to the partnership for $80,000. If the building had an adjusted basis to Roger of $105,000, how much gain or loss does Roger recognize on this transaction?
A) $12,750 loss
B) $25,000 loss
C) $12,750 gain
D) $0 gain or loss
E) $25,000 gain
4. Which of the following items may not be subject to the self-employment tax?
A) Amounts paid to an independent contractor who is the sole proprietor of his company.
B) Amounts received by an author as royalties from a book he wrote.
C) Rental income from apartments owned by an individual whose regular source of income is wages and salaries.
D) A partner’s distributive share of partnership business income
E) Amounts paid to a consultant who is the sole proprietor of his company.
