Exam 20: Forming and Operating Partnerships

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Question 61

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Under proposed rules issued by the IRS, in which of the following situations should an LLC member be treated as a general partner for self-employment tax purposes?

A) The member is not personally liable for any of the LLC debt.
B) The member has authority to contract on behalf of the LLC.
C) The member spends 450 hours participating in the management of the LLC's trade or business during the taxable year.
D) The member is listed on the LLC's letterhead.

E) None of the above
F) B) and D)

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Question 62

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KBL, Inc., AGW, Inc., Blaster, Inc., Shiny Shoes, Inc., and a group of 24 individuals form Shoes Galore General Partnership on October 11, 20X9. Now, Shoes Galore must adopt its required tax year-end. The partners' year-ends, profits interests, and capital interests are reflected in the table below. Given this information, what tax year-end must Shoes Galore use and what rule requires this year-end? $\begin{array} { | c | } \hline \quad\quad\quad\quad\quad\quad\quad\quad\quad{ \text { Shoes Galore Partnership } }\quad\quad\quad\quad\quad\quad\quad\quad \\\end{array}$ $\begin{array} { | c | c | c | c | } \hline & \text { Year-End } & \text { Profits } & \text { Capital } \\\hline \text { KBL, Inc. } & 1 / 31 & 25 \% & 25 \% \\\hline \text { AGIV, Inc. } & 1 / 31 & 20 \% & 20 \% \\\hline \text { Blaster, Inc. } & 3 / 31 & 4 \% & 4 \% \\\hline \text { Shiny Shoes, Inc. } & 6 / 30 & 3 \% & 3 \% \\\hline 24 \text { Individuals }& 12 / 31 & \begin{array} { c } 2 \% \text { each } \\( 48 \% \text { total } )\end{array} & \begin{array} { c } 2 \% \text { each } \\( 48 \% \text { total } )\end{array} \\\hline\end{array}$