Taxation of Corporations and Partnerships Practice Flashcards

Comprehensive practice flashcards covering Partnership Taxation, Corporate Distributions, Liquidations, Organizations (§ 351), and the QBI Deduction (§ 199A) based on the provided lecture notes.

According to the aggregate theory of partnerships, what does a partner essentially own?

The partner essentially owns a share of the partnership’s underlying assets.

How is a liquidating distribution distinguished from a current distribution in a partnership?

The categorization depends solely on whether the partner remains a partner after the distribution is made.

Under Code §§ 751(c) and (d), what two types of assets are classified as 'hot assets'?

Unrealized receivables and inventory.

What is the deemed ordering sequence for distributing multiple properties in a proportionate current partnership distribution?

Step 1: Cash; Step 2: Unrealized receivables and inventory; Step 3: All other assets.

If a partner contributes appreciated property to a partnership, within how many years must the property be distributed to another partner to trigger precontribution gain recognition?

$$7\,years$$

Under Code § 751(b), when is inventory considered 'substantially appreciated'?

If the fair market value of all inventory items exceeds $120\%$ of the partnership’s adjusted basis in them.

What are the two categories of payments under a § 736 buyout package for a retiring partner?

§ 736(a) income payments and § 736(b) property payments.

What is the holding period requirement for a 'carried interest' to be treated as long-term capital gain upon sale?

More than $3\,years$

When does a 'substantial built-in loss' exist for purposes of a § 754 election in a sale of a partnership interest?

When the partnership’s adjusted basis for all property exceeds the fair market value by more than $\$250,000$, or the partner would be allocated more than a $\$250,000$ loss.

For tax purposes, who does the term 'family' include in a family partnership?

The individual's spouse, ancestors, lineal descendants, and trusts for their benefit; it does not include siblings.

How does a corporation generally recognize gain or loss on the distribution of property in a complete liquidation under § 336(a)?

As if the property were sold at its fair market value.

To qualify for a § 332 parent-subsidiary liquidation, what minimum percentage of the subsidiary's stock must the parent own?

At least $80\%$ of the voting power and value.

The § 338 election allows a parent corporation to treat the acquisition of stock as a purchase of what?

As a purchase of the assets of the subsidiary.

What are the three core requirements for nonrecognition of gain or loss under Code § 351?

(1) Property is transferred, (2) in exchange for stock, and (3) the transferors are in control of the corporation immediately after the exchange.

What constitutes 'control' for purposes of the Code § 351 test?

Ownership of stock possessing at least $80\%$ of total combined voting power and at least $80\%$ of the total number of shares of all other classes of stock.

Under § 357(c), gain is recognized if the sum of liabilities assumed by the corporation exceeds what amount?

The adjusted bases of the properties transferred.

What is the maximum annual ordinary loss deduction limit for § 1244 stock for spouses filing a joint return?

$$\$100,000$$

Net capital losses for a corporation may be carried back and forward for how many years?

Carried back $3\,years$ and forward $5\,years$.

Code § 291 requires a corporation to recognize additional ordinary income equal to what percentage of the excess depreciation recapture under § 1250?

$$20\%$$

For 2025, a partnership meets the gross receipts test to use the cash method if its average annual gross receipts do not exceed what threshold?

$$\$31\,million$$

What is the maximum percentage for the Dividends Received Deduction (DRD) when a corporation owns at least 80% but less than 100% of the distributing corporation?

$$100\%$$

What rate of tax is applied to qualified dividends for high-income individual taxpayers?

$$20\%$$

Under § 311(b), what is the effect on a corporation when distributing appreciated property as a dividend?

The corporation recognizes gain but not loss.

According to § 318, an individual is treated as owning stock owned by which family members?

Spouse, parents, children, and grandchildren.

What is the general formula for the QBI deduction under § 199A?

The lesser of $20\%$ of Qualified Business Income ($QBI$) or $20\%$ of Modified Taxable Income.

In 2025, what are the taxable income thresholds for the QBI deduction phase-in for single and married taxpayers filing jointly?

$\$197,300$ for single taxpayers and $\$394,600$ for married taxpayers filing jointly.

What amount of 'rental services' hours must be performed annually to qualify for the Rental Real Estate Safe Harbor under § 199A?

At least $250\,hours$ per year.

The W-2 Wages/Capital Investment Limit for QBI is the greater of two amounts; what is the first amount?

$50\%$ of the W-2 wages paid by the qualified trade or business.

Which two professions are specifically excluded from the 'specified service trade or business' definition under § 199A?

Architects and engineers.

What is the 'depreciable period' for qualified property under § 199A?

A minimum of $10\,years$.