A. Electing large partnership rules differ from other partnership rules in all of the following areas except
1. partnership income reporting.
2. partnership termination.
3. partnership audits.
4. All of the above are correct.

B. On the first day of the partnership's tax year, Karen purchases a 50% interest in a general partnership for $30,000 cash and she materially participates in the operation of the partnership for the entire year. The partnership has $40,000 in recourse liabilities when Karen enters the partnership and the partnership incurs $20,000 of nonrecourse liabilities during the year. Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses. There is no minimum gain related to the nonrecourse liability. During the year the partnership incurs a $120,000 loss. How much of the loss can Karen report on her tax return for the current year?
1. $30,000.
2. $40,000.
3. $50,000.
4. $60,000.
C. Identify which of the following statements is true.
1. A partner's relief of debt is treated as if the partner receives a cash distribution.
2. When a partnership assumes any liabilities of the transferor, the transferor has an increase in the basis of his or her partnership interest.
3. Gain recognized by a contributing partner because of the assumption of liabilities by the partnership increases the partnership's basis in the contributed property.
4. All are false.

D. Identify which of the following statements is true.
1. Formation of a partnership requires legal documentation.
2. An individual engaged in the active conduct of a business must elect not to be taxed as a partnership.
3. A partnership exists as long as there are at least two individuals or entities engaged in the active conduct of a trade or business or a financial operation and the business is not a trust or a corporation.
4. All are false.

E. The definition of a partnership does not include
1. a syndicate.
2. a group.
3. a pool.
4. All are included.

F. Identify which of the following statements is true.
1. All of the partners in a limited partnership have limited liability.
2. A limited partnership must have at least two general partners.
3. A limited partnership cannot have a corporate general partner.
4. All are false.