<p>1. Discuss the formation of a partnership. Is any gain or loss recognized? Explain.</p><p>Generally a partner recognizes no gain or loss on the formation of partnership. The most common way to form a partnership is for two or more partners (individuals or entities) to contribute cash, property, or services in exchange for a partnership interest.</p><p>3. How do taxation for the corporate form and taxation for the partnership form differ?</p><p>A partnership is subject to tax only at the partner level. In contrast to a corporation that pays a corporate tax, and then the individual shareholder is subject to tax on the dividends ( double taxation), a partnership’s income flows through to it partners and the partnership pay no income tax at the entity level.</p><p>12. Can a partner have a salary from a partnership? Why? What is a guaranteed payment? Partners of a partnership are not employees of the partnership; thus they cannot receive a salary. Partners are owners of the partnership and are considered self-employed individuals (or entities) that have merged together to run a business. Guaranteed payments are payments made to partners for services rendered. To quality as a guaranteed payment, the payment must be calculated without regard to partnership income. Guaranteed payments are the only items that are reported both as deduction for ordinary income and as a separately stated item.</p><p>15. If a partner owns a 20% interest, does that necessarily mean that he or she will receive 20% of the net income from the partnership? Explain. No, the partnership is changed flexibility. The calculation differs if changes in ownership occurred during the year or special allocations are made between the partners. Every year each partner in a partnership must receive a Schedule K-1, which reports the partner’s hare of ordinary income or loss and each separately stated item. </p>