Question

12.For federal income tax purposes a partnership is

a.a pass-through entity.

b.sometimes taxed as a separate entity.

c.taxed as a C corporation.

d.not permitted to exceed 100 partnerships (general and limited).

13.A general partner

a.has the right to inspect partnership books and records at all reasonable times.

b.may copy partnership books and records with the consent of the managing partner.

c.may not transfer his/her partnership economic interest without the written consent of all other partners (or partner),.

d.cannot receive a salary from the partnership in addition to his/her share of profits.

14.General partners

a.are not personally liable for the debts of the partnership.

b.are personally liable for the debts of the partnership.

c.are liable for the debts of the partnerhip to the extent of their investment in the partnership.

d.must register as such in the state where the partnership was formed.

Answer 1

12. Option a. a pass through entity.

For federal income tax purposes, the Partnership is treated as a pass through entity. Since, the entity doesnot pay taxes on its income but the owners of the firm pay tax on their distributive share of the entity's taxable income. As the partners and firm is not treated as seperate entity.

13. Option a.

A general partner has the right to inspect partnership books and records at all reasonable times and there is no restriction in the inspection of books and can freely transfer econimic interest. He also can receive salary in addition to his/her profits.

14. Option b is correct.

Unlike the other partners, the general partners have unlimited liabilities towards the debts of the firm. Hence, his liability exceeds the amount of investment made in the partnership. Therefore, General partner are personally liable for the debts of the partnership.