P2-U10 · PART 2 · SOURCE CYCLE 2026-2027
Partnership Overview
How to complete this unit
This unit uses 26 source-gated recall cards and 25 admissible practice questions. Complete the sequence in order; the unreleased wiki prose remains outside the learner path.
- 1 · LearnBuild the rule
Answer each recall prompt before opening it. Then learn the exact rule, test the controlling facts through four quick challenges, explore common questions, and finish with one own-words teach-back.
- 2 · ApplyUse it in context
Complete at least 20 mapped questions over two sessions. Review the explanation even when the answer is correct.
- 3 · ProveTest readiness
Use the Part 2 mock under time pressure. Return here for every flagged or missed concept before the next attempt.
Verified recall questions
Only cards whose complete question and answer were checked against exact primary-authority evidence appear here. Stable unit ownership gathers this lesson across 1 textbook collection.
Q1.Alder Partnership pays a partner a fixed amount regardless of partnership income. What type of payment is it?
A guaranteed payment
Q2.Alder contributes property for a partnership interest. What is the usual recognition result?
Neither partner nor partnership recognizes gain or loss
Q3.What is the general Form 1065 due-date rule stated for a partnership tax year?
The 15th day of the third month after the tax year ends
Q4.What threshold rule governs whether a partnership may elect out of the centralized partnership audit regime for a tax year?
The partnership must be an eligible partnership for that tax year
Q5.Which of the following partnerships is AUTOMATICALLY required to file its return electronically?
A partnership with 101 partners.
Q6.Andrew and Camille are married and file separate tax returns (MFS). They own a restaurant together and share profits and losses equally. Their business is not an LLC. They would like to make a Qualified Joint Venture election. Based on these facts, how would their business be classified for IRS purposes?
As a partnership.
Q7.At the partnership level, how are guaranteed payments reported on Form 1065?
As a business expense.
Q8.Guaranteed payments are made to partners and are determined without regard to the partnership’s income. When are guaranteed payments included in an individual partner’s taxable income?
Guaranteed payments are included in income in the partner's tax year in which the partnership's tax year ends.
Q9.When a partner contributes property to a partnership, the partnership’s basis in the contributed property is generally:
Is generally the same as the adjusted basis of the partner.
Q10.Premiums for health insurance paid by a partnership on behalf of a partner are treated as guaranteed payments. The partnership can deduct the payments as a:
Business expense.
Q11.What is the purpose of Schedule K-1 in a partnership tax return?
It is used to report a partner's distributive share of taxable income or loss.
Q12.Which of the following is NOT a separately stated item on a partnership tax return?
Cost of goods sold.
Q13.Johnathan, Robin, Shante, and Theresa form an equal partnership. Each partner contributes $10,000 and receives an equal ownership interest in the partnership (25%). Under the partnership agreement, they share partnership profits and losses equally. The partnership borrows $135,000 and purchases business equipment using a business line of credit. All of the partners except for Theresa personally guarantee the loan. What is each partner's basis after this transaction?
Theresa's basis is $10,000, and the other partners each have a basis of $55,000.
Q14.Hialeah and Vincent come together to form Burrows Law Firm, LLP. Each contributes $20,000 during the initial formation of the partnership. Their partnership agreement states that Hialeah will receive 35% of the distributive income, and Vincent will receive 65%, because Vincent has more years of litigation experience. In 2025, the partnership has net ordinary income of $200,000. What is each partner's distributive share of the partnership profits?
Hialeah: $70,000, Vincent: $130,000
Q15.Tasty Sandwiches, LLC operates as an accrual-based business; it is taxed as a partnership and files Form 1065. In addition to receipts from sandwich and beverage sales of $250,000, the LLC has the following items of income and expenses for the year: Wages paid to employees: $50,000 Insurance expense: $5,000 Charitable contributions: $2,000 Business Licenses: $5,000 Rental income from the rental of an office above the shop: $25,000 Guaranteed payments to Elvis, the shop’s founder: $75,000 What is the ordinary business income that Tasty Sandwiches should report on its Form 1065?
$115,000
Q16.Lucy and Jessica are equal (50%) partners in a pizzeria restaurant. At the beginning of the year, the business purchases a new $30,000 pizza oven. They want to take the section 179 deduction for the full cost of the oven. The partnership's ordinary income before the section 179 deduction is $25,000. There were no other qualifying section 179 purchases during the year. What is the amount of section 179 deduction that Lucy can potentially deduct on her individual tax return?
$12,500
Q17.The Western Ridge Partnership generated income and expenses as stated below. What is the amount of ordinary business income that Western Ridge should report for the year on its Form 1065? • Employee wages: $15,000 • Rental real estate income: $20,000 • Charitable contributions: $500 • Cost of goods sold: $10,000 • Income from sales: $75,000
$50,000
Q18.Masha and Delma form M&D Partnership. Masha contributes $16,000 cash, and Delma contributes engineering equipment with a fair market value of $15,000 and an adjusted basis of $6,000. What amount should Delma report as a gain as a result of this transaction?
$0
Q19.Drayton Valley Farms, LLC is taxed as a partnership. Kateri contributes farmland to Drayton Valley Farms in exchange for a 40% ownership interest. The farmland has a fair market value of $70,000, an adjusted basis of $40,000, and a related mortgage of $10,000 that Drayton Valley Farms assumes. What is Kateri's basis in her LLC interest after the contribution of the land?
$34,000
Q20.Xavier is a 10% partner in Hartville Partnership. According to the partnership agreement, Xavier is entitled to a fixed annual guaranteed payment of $5,000. During the year, the Hartville Partnership has $55,000 of net ordinary income before deducting the guaranteed payment. How much partnership income should Xavier report on his individual return for this year?
$10,000
Q21.Austin is a general partner in the Kerner Partnership. During the year, Austin personally assumes $100,000 of the partnership's liabilities. Which of the following statements regarding partnership liabilities is correct?
The assumption of partnership debt by Austin increases his basis.
Q22.Willem and Aletta form Humboldt Fine Spirits, an equal partnership. They each contribute $20,000 cash to the partnership to get the business going. Under their partnership agreement, they share all partnership profits and losses equally. They borrow $60,000 and purchase depreciable business equipment. However, Willem has poor credit, so Aletta is the only signer on the loan. Aletta is the only one required to pay the creditor if the partnership defaults, so she has an economic risk of loss related to the loan. The payments on the loan are made from the partnership bank account. What is Aletta's basis in the partnership, and what is Willem's basis?
Aletta: $80,000, Willem: $20,000.
Q23.If a partnership requests additional time to file its return, how long will the filing deadline be extended?
Six months.
Q24.An individual partner who receives income from a partnership must report their share of partnership income on which form?
Schedule E of Form 1040.
Q25.When payments are made by a partnership to partners without regard to partnership income, these payments are called:
Guaranteed payments.
Q26.What is the latest that a partnership agreement can be modified, and its terms be applicable to the partnership tax return during a taxable year?
No later than the partnership return due date (without extensions).
Ready to move on?
- ▸ Explain at least 80% of these 26 rules without opening the answer, twice on different days.
- ▸ Score 80% across 20 or more mapped questions over two sessions, not one memorized round.
- ▸ Complete a timed Part 2 mock and return to this unit if its concepts remain flagged or missed.
Use these checks to choose your next study action. They do not predict a PSI scaled score.