Corporate Partnership Estate and Gift

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9

Taxation of Partnerships and Partners

Test Bank

True or False

________ 1. Under the "check the box" regulations, any unincorporated business
having two or more owners and that does not elect to be taxed as a
corporation will be treated as a partnership.

________ 2. Owners of investment property can elect that Subchapter K not apply to
their ventures if each owner retains a separate and undivided ownership
interest in the acquisition, operation, and disposition of the property.

________ 3. It is possible for a business to be taxed as a partnership even though one

of its partners is a corporation.

________ 4. General partnerships are owned solely by two or more general partners,
and limited partnerships are owned solely by two or more limited
partners.

________ 5. A limited partner, by definition, may not participate in the management

of the limited partnership.

________ 6. A contributing partner's holding period for an interest in a partnership

begins on the date the partnership interest is acquired.

________ 7. B contributes her business property to AB Partnership. This property has

a market value of $2,000 and a basis to B of $1,500. The entity theory
applies in this situation. Accordingly, the basis of the property to the
partnership is $2,000, and B recognizes a $500 gain.

________ 8. When noncash assets are contributed to a partnership, the entity theory
usually applies and, therefore, gain or loss is recognized.

________ 9. The partnership's holding period for assets contributed to the partnership
by a partner begins with the date the assets are contributed.

________ 10. A partner's share of liabilities is generally based on her or his economic
risk of loss in the case of recourse debt and loss-sharing ratio in the case
of nonrecourse debt.

________ 11. When a partner's share of debt is decreased, the reduction is treated as a
cash distribution from the partnership to the partner.

________ 12. The contribution of depreciated property in a tax-free exchange for a

 partnership interest does not trigger the § 1245 or § 1250 depreciation
recapture provisions.

________ 13. Partners may agree to specially allocate any existing revenue, expense,
or other partnership item in any way they wish when (a) they have
owned their interest in the partnership for the entire year, and (b) the
allocation has a substantial economic effect. (Assume all partners
contributed cash for their capital interests.)

________ 14. Special allocations of depreciation, depletion, gain, and loss accrued at
the date property is contributed to a partnership is optional.

________ 15. An individual who contributes services in exchange for an unrestricted

capital interest in a partnership has includible ordinary income equal to
the fair market value of the capital interest.

________ 16. Organization costs of a partnership can be deducted when incurred or

paid, or they can be amortized on a straight-line basis over a period not
to exceed 60 months, provided the partnership files the proper election.

________ 17. Syndication fees paid by a partnership may be amortized on a straight-

line basis over a period of 60 months or longer.

________ 18. Form 1065 and Schedule K-1 are prepared according to the aggregate
theory; however, special tax elections usually reflect the entity theory.

________ 19. An individual who contributes services in exchange for an interest in the
future profits of a newly formed partnership does not recognize current
year income on the receipt of the interest.

________ 20. S owns a 30 percent interest in the capital and profits of ST partnership.
S sold land ($5,000 basis) to ST for its fair market value of $3,000. S's
$2,000 loss will be disallowed to him.

________ 21. A has been a partner in the ABC Partnership for only four months.
During the current year, the partnership sold investment land that it
purchased six years ago and recognized a $100,000 gain. A's distributive
share of this gain is long-term capital gain.

________ 22. A 70 percent partner has a $5,000 recognized loss when he sells
equipment with a basis of $35,000 to the partnership at its FMV of
$30,000.

________ 23. In most instances, a new partnership should use a January 31 year-end in
order to maximize deferral of partnership income for calendar year
partners.

________ 24. W, B, and G, the sole owners of a partnership, use different tax years for
 their individual returns. They agree to adopt concurrent tax years for
their personal returns. The partnership may also change its tax year to
coincide with those of the partners without approval from the IRS.

________ 25. For purposes of determining a year-end for the partnership, a principal
partner is defined as one who owns 50 percent or more of the
partnership.

________ 26. The portion of a partner's distributive share of losses that exceeds the
partner's basis may be carried forward indefinitely and deducted in a
later year or years when that partner's basis is increased.

________ 27. The flow-through of partnership losses is considered to be the last event
to occur during a partnership's taxable year.

________ 28. Dividend and interest income are considered passive activity income to a
partner.

________ 29. Any portion of a partner's distributive share of current year partnership
loss that is a nondeductible passive activity loss does not reduce the
partner's outside basis in the partnership interest.

________ 30. A guaranteed payment from a partnership always represents current

ordinary income to the recipient partner.

Multiple Choice

________ 31. Which of the following is not considered a partnership for Federal
income tax purposes?

a. Trust

b. Pool

c. Syndicate

d. Joint venture

e. Limited Liability Company

________ 32. Which of the following is not a legal characteristic of a general

partnership?

a. Unlimited liability of partners for partnership recourse debt

b. Restricted transferability of partnership interests

c. Centralized management
 d. Limited life

e. All of the above are legal characteristics of partnerships.

________ 33. Based on the entity concept of partnerships, which of the following
statements is false?

a. A partnership may enter into taxable transactions with partners.

b. A partnership is legally liable for debts of the partners.

c. A partnership must file an annual tax return (Form 1065) reporting

the results of operations.

d. A partnership is required to make tax elections for partnership

activities that are applicable to all partners.

e. A partnership may hold title to property in its own name.

________ 34. Which of the following transactions between partnerships and partners
are reported based on the entity concept?

a. A partner exchanges appreciated land for a partnership capital

interest.

b. A partnership makes a charitable contribution.

c. A partner sells appreciated equipment to the partnership.

d. Both b. and c. follow the entity concept.

e. All of the above follow the entity concept.

________ 35. An individual received a 70 percent capital interest in a general

partnership by contributing the following:

• Investment land purchased 10 years ago for $40,000 and valued

at $90,000. There was a $50,000 nonrecourse debt on the land
that was also transferred to the partnership.

• Services to organize the partnership valued at $22,500.

• Business inventory purchased nine months ago for $10,000 and

valued at $8,000.

This general partner's basis in the partnership after the contribution is

a. $0
 b. $22,500

c. $35,000

d. $57,500

e. $72,500

________ 36. T transfers a building ($90,000 market value, $40,000 basis), plus a
$60,000 nonrecourse debt on the building, to a partnership in exchange
for a 30 percent capital interest valued at $30,000. The partnership has
no other debt. T's basis in his partnership interest is

a. $0

b. $2,000

c. $12,000

d. $30,000

e. $40,000

________ 37. On January 1, 2011, F exchanged proprietorship equipment ($102,000

market value and $84,000 basis) for a 20 percent capital interest in a
partnership. The calendar year partnership's 2011 and 2012 tax
depreciation deductions for this equipment total $8,400 (10% of
contributed basis). How much of the $8,400 should be allocated to F?

a. $1,680

b. $800

c. $240

d. $232

________ 38. R exchanged a proprietorship parking lot ($23,000 market value and
$15,000 basis) for a 10 percent capital interest in a partnership. The
partnership uses the property for four years and then sells it for $25,000.
R must recognize income from the sale of

a. $10,000

b. $8,200

c. $1,000

d. $200
________ 39. An accountant performed services for EZ partnership and, in lieu of her
normal fee, accepted a 10 percent unrestricted capital interest in the
partnership with a fair market value of $7,500. How much income from
this arrangement should the accountant report on her tax return?

a. $7,500

b. $5,000

c. $2,500

d. $0

________ 40. Individual D contributes $15,000 cash and investment land (FMV
$35,000 and basis $22,000) and Individual E contributes business assets
(FMV $50,000 and basis $60,000) to create the new DE Partnership.
Which of the following statements is accurate?

a. Both D and E have initial capital balances of $50,000. D's outside

basis in his interest is $37,000 and E's outside basis in his interest is
$60,000.

b. Both D and E have initial capital balances of $50,000. D's outside

basis in his interest is $22,000 and E's outside basis in his interest is
$60,000.

c. Both D and E have initial capital balances and outside bases in their
interests of $50,000.

d. D's initial capital account balance and outside basis in his interest are
$37,000 and E's initial capital account balance and outside basis in
his interest are $60,000.

e. Because D and E have equal capital account balances, they must

share partnership profits and losses equally.

________ 41. V is to perform services in exchange for a 20 percent capital interest in a

partnership. Both the services and the capital interest are valued at
$30,000. However, the agreement between V and the partnership states
that the capital interest is forfeited if V violates any part of the service
contract during the next five years. V believes the market value of the
interest at the end of the fifth year will be $70,000. (Assume this $70,000
value is accurate when choosing among the answers below.) V has a
choice of recognizing

a. $0 now or $70,000 at the end of the fifth year

b. $30,000 now or $40,000 at the end of the fifth year

 c. $70,000 now or $0 at the end of the fifth year

d. $0 now or $70,000 when the capital interest is sold

e. None of the above

________ 42. In return for services rendered to it by C, the ABC partnership transfers a
one-fourth capital interest to C when it only has one asset, a tract of land
with a basis of $20,000 and fair market value of $30,000. The
partnership has no liabilities. As a result, ABC's recognized gain and
basis in the land, respectively, are

a. $10,000 and $30,000

b. $2,500 and $22,500

c. $2,500 and $27,500

d. $10,000 and $20,000

________ 43. QT Partnership, which operates a retail clothing store, had the following
information at year-end:

Gross sales $580,000

Cost of goods sold 377,000

Repairs 1,500

Depreciation 2,000

Employee salaries 32,000

Charitable contributions 500

Section 1231 gain 200

Short-term capital gain 350

Dividends 750

What is QT Partnership's ordinary income for the year?

a. $167,500

b. $167,700

c. $167,850
 d. $168,050

e. $168,300

________ 44. Which of the following is not used to calculate ordinary income (loss) on
Form 1065?

a. Business interest income

b. Ordinary income from other partnerships and fiduciaries

c. Payments to Keogh or IRA plans for partners

d. Cost of goods sold

e. Guaranteed payments to partners

________ 45. Items that may be subject to special tax treatment and that are reported
separately on Schedule K of the partnership return include all of the
following except

a. Dividends

b. Capital gains and losses

c. Charitable contributions

d. Tax credits

e. Business bad debts

________ 46. For the current year, Gamma Partnership has $60,000 net operating
revenues before consideration of any payment to its two equal partners,
G and H. During the year, Gamma made a $25,000 guaranteed payment
to Partner G. It also distributed $5,000 cash to both G and H. Gamma
and its two partners all use the calendar year for tax purposes. Based on
these facts, how much partnership income should G and H report on
their current year individual returns?

a. Both G and H should report $30,000 of partnership income.

b. Both G and H should report $17,500 of partnership income.

c. Both G and H should report $12,500 of partnership income.

d. G should report $42,500 and H should report $17,500 of partnership

income.

e. G should report $37,500 and H should report $12,500 of partnership

 income.

________ 47. At the beginning of the current year, K's basis in her partnership interest
was $35,000. At the end of the year, K received a K-1 from the
partnership that showed the following:

Increase in share of partnership liabilities $8,700

Cash withdrawal 20,000

Partnership taxable income13,500

Dividend income 5,000

Short-term capital loss 1,400

Charitable contribution 500

Special allocation of depreciation 1,800

Based on these facts, compute K's basis in her partnership interest at the
beginning of the next year.

a. $31,200

b. $42,200

c. $31,700

d. $38,500

e. $39,900

________ 48. Two years ago, J contributed a capital asset (FMV $10,000 and basis
$16,000) to the JKL Partnership. The asset was a nondepreciable § 1231
asset to the partnership. During the current year, the partnership sold the
asset for $8,000. As a result of the sale, the partnership should recognize:

a. An $8,000 §1231 loss

b. A $6,000 capital loss and a $2,000 § 1231 loss

c. An $8,000 capital loss

d. A $2,000 §1231 loss

e. A $2,000 capital loss

________ 49. Z has a 40% interest in the profits and a 20% interest in the losses of the
 Lytton Partnership. Z's outside basis in his interest at the beginning of
the year was $100,000. During the year the partnership borrowed
$80,000 on a fully recourse basis and took out a $200,000 nonrecourse
mortgage on real estate owned by the partnership. Based on these facts,
which of the following statements is accurate?

a. If Z is a general partner, he may increase the basis in his partnership

interest by a total of $96,000 because of the increased partnership
debt.

b. If Z is a limited partner, he may increase the basis in his partnership

interest by a total of $80,000 because of the increased partnership
debt.

c. If Z is a general partner, he may increase the basis in his partnership

interest by a total of $56,000 because of the increased partnership
debt.

d. If Z is a limited partner, he may increase the basis in his partnership

interest by a total of $16,000 because of the increased partnership
debt.

e. Both a. and b. are accurate.

________ 50. At the beginning of the current year, Corporation M had a $50,000 basis
in its 50% interest in the M&N Partnership. For the year, M&N incurred
a $168,000 net operating loss and a $32,000 capital loss and received
$20,000 of dividend income. The amount of the partnership's debts did
not change during the year and it made no distributions to its partners.
Based on these facts, what amount of M&N's ordinary loss and capital
loss may M recognize during the current year?

a. $42,000 ordinary loss and $8,000 capital loss

b. $50,000 ordinary loss

c. $50,400 ordinary loss and $9,600 capital loss

d. $54,000 ordinary loss and $16,000 capital loss

e. $60,000 ordinary loss

________ 51. Which of the following is not a requirement for "substantial economic
effect" within the meaning of § 704(b)?

a. Tax allocation of profits must be in the same ratio as the partners'

capital accounts.
 b. Tax allocations of profit and loss must be reflected in the partners'
book capital accounts.

c. Liquidating distributions must be made on the basis of ending capital

account balances.

d. Tax allocations of profits and losses must be in the same ratio.

e. Answers a. and d. are not requirements for "substantial economic

effect."

________ 52. Which of the following is false regarding a guaranteed payment?

a. It is recognized as income by the recipient partner in the taxable year

received.

b. It is either a deductible expense or a capital expenditure to the

partnership.

c. It is ordinary income to the partner receiving the payment.

d. It is determined without regard to partnership income.

e. It is added to a partner's distributive share of ordinary income in

calculating self-employment income.

________ 53. Partner A owns a 60% interest in the capital and profits of the ABC
Partnership. During the year A sells marketable securities to the
partnership for their FMV of $30,000. The partnership intends to hold
the securities as an investment. Based on these facts, which of the
following is accurate?

a. If A's basis in the securities was $25,000, A must recognize a $5,000

ordinary gain on the sale.

b. If A's basis in the securities was $25,000, A recognizes no gain on

the sale.

c. If A's basis in the securities was $40,000, A may recognize a $10,000

capital loss on the sale.

d. If A's basis in the securities was $40,000, A recognizes no loss on the

sale.

e. None of the above is accurate.

________ 54. Partner J, a cash basis taxpayer, is a 75% partner in the cash basis J&D
Partnership. During the current year, J lends the partnership $50,000,
receiving a properly executed note from the partnership bearing the
 market rate of interest. J&D used the loan proceeds as working capital.
Which of the following is accurate?

a. Because J owns more than a 50% interest in J&D, the interest

payment will be treated as a guaranteed payment made by J&D to J.

b. Because J owns more than a 50% interest in J&D, the interest

payment will be treated as a distributive share of partnership taxable
income to J.

c. The interest paid on the note will be ordinary interest income to J and
a current interest deduction to J&D in the year paid.

d. Because J owns more than a 50% interest in J&D, the interest

payment will be treated as a guaranteed payment made by J&D to J.

e. Because J owns more than a 50% interest in J&D, the interest

payment will be a nondeductible expense to J&D.

________ 55. Unrelated individuals P, Q, R, and S are partners in PQRS Partnership.

The partnership experienced an operating loss of $5,000 during the year.
Based on the following information, how much loss can the partners
deduct on their respective individual tax returns?

Partner Distributive Profit and Loss % Basis in

Partnership Determined before Loss Distribution

P 40 $10,000

Q 25 8,000

R 25 1,000

S 10 1,000

100% $20,000

The following answer choices are arranged in partner order of P, Q, R,

and S.

a. $2,000, $ 1,250, $ 1,250, $500

b. $2,000, $ 1,250, $ 1,000, $500

c. $2,000, $1,250, $0, $500

d. $5,000, $3,000, $0, $0

e. $4,000, $2,500, $2,500, $1,000

________ 56. G and H are individual partners in GH Partnership and share equally in
its profits and losses. G had a basis of $5,000 in the partnership, before
considering the $14,000 ordinary loss reported by GH for 2011. In 2012,
the partnership reports a $6,000 ordinary gain on Form 1065. What
income or loss should G properly report on his 2012 individual return?
Assume that there are no other transactions that affect G's basis in the
partnership for 2011 and 2012.

a. $0

b. $2,000 loss

c. $1,000 income

d. $2,000 income

e. $3,000 income

________ 57. X has the following income and loss items for the current year:

Salary from an unrelated corporation $100,000

Interest income 1,000

Loss from a general partnership in which X materially

participated (20,000)

Loss from a limited partnership (10,000)

X's A.G.I. for the current year is

a. $101,000

b. $70,000

c. $81,000

d. $80,000

e. $71,000

________ 58. Which of the following partnership interests is not a § 469 passive
activity?

a. A 20% limited interest in a partnership that operates a profitable

restaurant business. The owner of the interest is an individual.

b. A 20% limited interest in a partnership that operates a profitable

restaurant business. The owner of the interest is a publicly traded
 corporation.

c. A 20% general interest in a partnership that operates a profitable

restaurant business. The owner of the interest is an individual who
does not materially participate in the day-to-day operations of the
business.

d. A 20% limited interest in a partnership that rents single family

houses and duplexes. The owner of the interest is an individual.

e. A 20% limited interest in a partnership that operates a profitable

restaurant business. The owner of the interest is a trust.

________ 59. Before consideration of his $8,000 distributive share of Jedi

Partnership's current year loss, individual C's basis in his partnership
interest was $5,000 and his at-risk amount was only $2,500. C has no
passive activity income for the current year. Based on these facts:

a. If C's interest in Jedi is a passive activity, he cannot deduct any of the

$8,000 distributive share and will have a basis in his partnership
interest of $5,000.

b. If C's interest in Jedi is not a passive activity, he can deduct $2,500

of the $8,000 distributive share and will have a basis in his
partnership interest of $2,500.

c. If C's interest in Jedi is not a passive activity, he can deduct $5,000

of the $8,000 distributive share and will have a basis in his
partnership interest of zero.

d. If C's interest in Jedi is a passive activity, he cannot deduct any of the

$8,000 distributive share and will have a basis in his partnership
interest of zero.

e. Both c. and d. are correct answers.

________ 60. O purchased a 20% interest in the OOPS partnership for $20,000 on
January 1, 2012. He purchased another 10% interest in OOPS for
$10,000 on December 1, 2012. As of January 1, 2013, what is O's
holding period in his partnership interest?

a. One year

b. One month

c. One year for 50% of his interest and one month for 50% of his
interest
 d. One year for 67% of his interest and one month for 33% of his
interest

________ 61. G is a 50% general partner and L is a 50% limited partner in the GL
limited partnership. The partnership's ordinary business income for the
year is $60,000. G receives a guaranteed payment of $15,000 for
managing the partnership and L receives a guaranteed payment of
$5,000 for helping to arrange some financing for GL. How much of this
income is subject to the self-employment tax?

a. $30,000 for G and $30,000 for L

b. $45,000 for G and $35,000 for L

c. $45,000 for G and $5,000 for L

d. $ 15,000 for G and $5,000 for L

Taxation of Partnerships and Partners

Solutions to Test Bank

True or False

1. True. Unless the business organization with two or more owners is incorporated
or elects to be taxed as a corporation, it will be treated as a partnership for federal
income tax purposes. (See p. 9-3.)

2. True. Each owner must retain a separate and undivided ownership interest in
order for the election to be valid. (See p. 9-3.)

3. True. There are no restrictions placed on who or what qualifies as a partner. The
Code and Regulations simply state that the word partner "means a member of a
partnership." [See p. 9-2 and § 761(b).]

4. False. All partnerships must have at least one general partner. (See p. 9-4.)

5. True. If a limited partner does participate in management, he or she may be

converted to general partner status. (See p. 9-4.)

6. False. If a partner contributes either § 1231 or capital assets to a partnership, the

holding period for the partner's interest in the partnership includes the period of
time the partner owned the contributed assets. [See Example 2, pp. 9-5 and 9-1,
and § 1223(1).]

7. False. The aggregate theory applies when a partner contributes property to a

partnership in exchange for a partnership interest. In this case, B recognizes no
 gain and the partnership takes a $1,500 carryover basis in the contributed
property. (See Example 2, pp. 9-5 and 9-6, and §§ 721 and 722.)

8. False. The aggregate theory applies. Consequently, when noncash assets are
exchanged for an interest in a partnership, the transfer is usually considered to be
tax-free at both the partnership and partner levels. (See p. 9-5 and §§721, 722, and
723.)

9. False. The partnership's holding period includes the period of time the
contributing partner held the assets. [See p. 9-5 and § 1223(2).]

10. False. Each partner's share of liabilities is based on his or her economic risk of
loss for recourse debt, but it is based on the profit-sharing ratio for nonrecourse
debt. (See Examples 6 and 7, p. 9-8 through 9-10, and §752.)

11. True. This is the statutory rule of § 752(b). (See p. 9-8.)

12. True. In such instances, potential recapture of depreciation is transferred to the

partnership. (See p. 9-5.)

13. True. This freedom of allocation, however, is not available for precontribution
income, gain, or loss when noncash assets are contributed. [See Examples 28 and
29, pp. 9-31 through 9-32, and § 704(c).]

14. False. The special allocation is mandatory. [See pp. 9-31 through 9-33, and §
704(c).]

15. True. The tax-free exchange provisions apply to property contributed to a

partnership but not to services contributed. (See Example 13, p. 9-13, and § 721.)

16. False. Organization costs must be capitalized. If an election is made, up to $5,000

of organization expenses can be deducted (assuming total organization expenses
do not exceed $50,000). Remaining organization expenses must be amortized
over 180 months. [See p. 9-18 and § 709(b).]

17. False. Syndication fees paid or accrued by a partnership remain on the books as
intangible assets until the partnership is liquidated. (See p. 9-18 and § 709.)

18. True. Section 703 specifies that most elections must be made at the partnership
level and that all partners are required to use the same methods for reporting their
share of partnership income, deductions, credits, and losses. (See p. 9-16.)

19. True. The current liquidation value of a future profits interest is zero. (See
Example 17 and p. 9-15.)

20. False. Such losses are disallowed only to a partner who directly or indirectly owns
50 percent or more of the capital or profits interest in a partnership. [See p. 9-40
and § 707(b)(1)(A).]
21. True. The character of the gain (short-term or long-term) is determined at the
partnership level. [See pp. 9-19 and 9-25 and § 702(b).]

22. False. The entity concept does not apply to transactions between a partnership and
a partner who directly or indirectly owns more than 50 percent of the capital or
profits interest of the partnership if the transaction results in a loss. Such a partner
cannot recognize the loss. [See p. 9-40 and § 707(b)(1)(A).]

23. False. A partnership must adopt the taxable year of those partners owning a
majority interest in the partnership. If the majority of the partners do not have the
same taxable year, the partnership must adopt the taxable year of its principal
partners. If the principal partners do not have the same year, the partnership must
adopt the fiscal year resulting in the least aggregative deferral of partnership
income. A partnership may select another taxable year, subject to IRS approval.
Normally the IRS will approve another taxable year, such as a January 31 fiscal
year, only if the taxpayer can establish a valid business purpose. [See Example
18, pp. 9-17 and 9-18, and § 706(b).]

24. True. A partnership may adopt the tax year of its majority owners without IRS
approval. [See p. 9-17 and § 706(b).]

25. False. In this context, a principal partner is one who owns 5 percent or more of the
partnership. (See p. 9-17.)

26. True. Any losses that exceed a partner's basis may be carried over indefinitely to
be deducted when the basis is increased. [See Example 34, pp. 9-34 and 9-35, and
§ 704(d).]

27. True. All distributions, contributions, and changes in partnership liabilities are
considered to occur before the flow-through of partnership losses. (See p.9-28 and
§ 705.)

28. False. Dividends and interest are classified as portfolio income. Passive activity
income is received from a business in which the partner does not materially
participate. [See pp. 9-36 and 9-37 and § 469(e).]

29. False. Basis reduction for a distributive share of partnership loss occurs regardless
of the application of § 469 to that loss. (See Example 38 and p. 9-36.)

30. True. This is the statutory rule of § 707(c). (See pp. 9-39 through 9-40.)

Multiple Choice

31. a. For income tax purposes, trusts, estates, and corporations are not classified as
partnerships. However, such organizations may own interests in partnerships. (See
pp. 9-2 and 9-3 and § 761.)

32. c. A partnership is not characterized by centralized management because all general

 partners have the legal right to participate in management decisions. [See p. 9-3
and Reg. § 301. 7701-2(a).]

33. b. According to the entity concept, a partnership has no responsibility for its
partner's debts. (See p. 9-4.)

34. c. The aggregate/conduit concept applies to the other transactions. The entity
concept applies to c, with all gain recognized by the partner, and the partnership
treats the equipment in the same way as it would if the purchase had been from an
unrelated individual. [See pp. 9-38 to 9-39 and § 707(a).] The gain in a is not
recognized. (See Example 2, pp. 9-5 through 9-6, and § 721.) The contribution in
b flows through the partnership to the partners and is deductible by them. (See pp.
9-25 and 9-26.)

35. d. The basis in the interest equals $57,500 [$40,000 land basis + $22,500 ordinary
income recognized on performance of services + $10,000 inventory basis –
$15,000 net relief of debt (30% of $50,000)]. (See pp. 9-5 through 9-13 and §§
722 and 752.)

36. c. T is treated as retaining responsibility for the portion of the debt that exceeds his
basis in the property ($60,000 – $40,000 = $20,000). The remaining portion of the
debt ($40,000) is treated as a partnership liability. T's basis is computed as
follows:

Basis of contributed property$40,000

Retained share of debt 20,000

Share of partnership debt ($40,000 × 30%) 12,000

Reduction in personal debt (60,000)

Total basis $12,000

(See Example 12 and pp. 9-10 through 9-12.)

37. c. The other partners should be allocated their 80 percent share based on 10% of the
$102,000 contributed value: $8,160 ($10,200 × 80%). F is allocated the remaining
tax depreciation of $240 ($8,400 – $8,160). [See Example 30, pp. 9-31 through 9-
33, and § 704(c).]

38. b. R must be allocated income equal to the appreciation at the time the property is
contributed to the partnership of $8,000 ($23,000 – $15,000) plus 10 percent of
the income equal to the appreciation that occurred while the partnership held the
property of $200 ($25,000 – $23,000 = $2,000 × 10%). [See Example 29, pp. 9-
31 through 9-33, and § 704(c).]

39. a. Because the accountant received an unrestricted capital interest in exchange for
 services, the FMV of that interest is includible ordinary income to her and
becomes her basis in the partnership. [See Example 13, p. 9-13, and Reg. § 1.721-
1(b)(1).]

40. a. Capital accounts are credited with the fair market value of contributed property
while outside basis equals the tax basis of contributed property. (See Example 2
and pp. 9-5 and 9-6.)

41. e. Per § 83, V may elect to recognize the $30,000 FMV of the interest in the year of
receipt or to defer recognition of the projected $70,000 FMV until the end of the
fifth year. (See Examples 14 and 15 and pp. 9-13 and 9-14.)

42. b. ABC is treated as having sold a one-fourth interest in the land for $7,500
($30,000/4). ABC must recognize a gain of $2,500 [$7,500 – ($20,000 basis/4 =
$5,000)]. The partnership's basis in the land is $22,500 [($20,000 × 3/4 =
$15,000) + $7,500]. (See Example 16 and pp. 9-14 and 9-15.)

43. a. Charitable contributions, dividends, § 1231 gains, and capital gains are stated
separately and are not used to calculate ordinary income. QT's ordinary income is
calculated as follows:

Gross sales $580,000

Cost of goods sold(377,000)

Gross income$203,000

Repairs (1,500)

Depreciation (2,000)

Employee salaries(32,000)

$167,500

(See Exhibit 9-2, pp. 9-26, and § 702.)

44. c. These payments are reported separately. (See Exhibit 9-2 and pp. 9-25.)

45. e. Bad debts are reported as a deduction on Form 1065. (See Exhibit 9-2 and pp.
9-25.)

46. d. The partnership taxable income after deduction of G's guaranteed payment is
$35,000 which is allocated equally between G and H. G must also report his
$25,000 guaranteed payment as ordinary income. [See Example 41, pp. 9-38 and
9-39, and § 707(c).]

47. d. K's basis equals the $35,000 beginning basis increased by her distributive share of
ordinary and dividend income ($18,500) and by the increase in her share of
 partnership liabilities ($8,700) and decreased by her distributive share of capital
loss, charitable contributions, and depreciation ($3,700) and her $20,000 cash
withdrawal. (See Example 23, p. 9-28, and §§ 705, 733, and 752.)

48. b. The $6,000 excess of the asset's basis over FMV at date of contribution must be
recognized as capital loss. The $2,000 remaining loss is a § 1231 loss. (See
Example 20, p. 9-26, and § 724.)

49. e. If Z is a general partner, he may increase his outside basis by 20% of the recourse
debt ($16,000) and 40% of the nonrecourse debt ($80,000) for a total increase of
$96,000. If Z is a limited partner, he may increase his outside basis by 40% of the
nonrecourse debt ($80,000). (See Examples 6 and 7, pp. 9-8 through 9-10, and §
752.)

50. c. Corporation M may increase its $50,000 basis by its $10,000 distributive share of
partnership dividend income. It may then deduct a total of $60,000 of its
distributive shares of partnership net operating loss ($84,000) and capital loss
($16,000). The $50,000 deduction is allocated proportionally between the two
categories of losses. [See Example 35, pp. 9-34 and 9-35, and § 704(d).]

51. e. There is no requirement that allocations of partnership profits and losses reflect
the relative capital contributions of the various partners. Similarly, partners may
agree to allocated partnership profits and losses in different ratios. (See p. 9-5.)

52. a. A partner recognizes a guaranteed payment in his or her taxable year that includes
the last day of the partnership taxable year in which the partnership accounted for
the guaranteed payment. [See Example 43, p. 9-39, and § 707(c).]

53. d. Per § 707(b), a partner who owns more than a 50% interest in a partnership may
not recognize loss upon the sale of property to the partnership. (See Example 44
and p. 9-40.)

54. c. This transaction is treated as a loan between unrelated parties, so that J must
recognize interest income upon receipt, and J&D may take an interest deduction
upon payment. [See pp. 9-38 and 9-39 and § 707(a).]

55. b. The amount of loss is limited to the partner's adjusted basis in the partnership.

P/L% × Loss = Distributive share

P 40% × $5,000 = $2,000

Q 25% × $5,000 = $1,250

R 25% × $5,000 = $ 1,250 (but limited to $ 1,000 basis)

S 10% × $5,000 = $500

 R will carry over the disallowed loss ($250) to be deducted in a later year or years
to the extent that R has increased his basis in the partnership. [See Example 34,
pp. 9-34 and 9-35, and § 704(d).]

56. c. G's share of the loss in 2011 is $7,000 (50% of $14,000). However, since G's basis
before loss distribution is only $5,000, G's deduction on his 2011 return is limited
to $5,000. Thus, G starts 2012 with a beginning basis of $0. In 2012, G's share of
profits is $3,000. G's unused 2011 distributed loss of $2,000 is subtracted from
G's 2012 $3,000 share of profits and results in net partnership income of $1,000
for G to report in 2012. Note that G has a basis in GH Partnership of $ 1,000 after
the receipt of his distributive share of the 2012 partnership profit ($3,000). [See
Example 34, pp. 9-34 and 9-35, and § 704(d).]

57. c. Active income of $80,000 ($100,000 – $20,000) plus portfolio income of $1,000
is included in A.G.I. The limited partnership loss of $10,000 is a passive loss and
will be carried forward to offset passive income in future years or deducted when
the partnership interest is disposed of. (See Example 38, p. 9-36, and § 469.)

58. b. Publicly traded (widely held) corporations are not subject to § 469. (See
Example 39, p. 9-37.)

59. d. The allocation of $8,000 of partnership loss to C reduces the outside basis in
his interest to zero. However, none of the loss can be deducted because C has no
passive activity income for the year. (See Examples 37 and 38 and pp. 9-36 and 9-
37.)

60. d. When a partner acquires his partnership interest at different times, holding period
is apportioned to the interest based on the fair market value of the interest
purchased. As of January 1, 2013, O has a one-year holding period in two-thirds
of his partnership interest ($20,000/$30,000, and a one-month holding period for
one-third ($10,000/$30,000) of his interest. (See pp. 9-5 and 9-6.)

61. c. All guaranteed payments receive by partners, whether general or limited, in return
for services rendered are included in self-employment income. A general partner's
distributive share of income is also self-employment income, but a limited
partner's share is usually not. Thus, G has $45,000 of self-employment income
($30,000 + $15,000) and L has $5,000. (See p. 9-27.)

Taxation of Partnerships and Partners

Comprehensive Problems

FACTS FOR COMPREHENSIVE PROBLEMS

Duo Limited Partnership was formed on February 1, 2012, with individuals Y and Z
making the following contributions:
 Y: Cash of $100,000

Z: Land with $100,000 fair market value and $80,000 basis

Y and Z share profits its and losses equally. Duo started business operations on February
1, 2012. The following current year's figures were prepared by Duo's controller, using the
cash method of accounting. Y is a general partner and materially participates in business
operations, and Z is a limited partner.

Gross sales $700,000

Costs of goods sold 400,000

Salaries to employees 150,000

Payroll taxes for employees 10,000

Guaranteed payment to Y 51,000

Operating expenses 150,000

Charitable contributions 20,000

Accounts payable 40,000

Nonrecourse debt 100,000

Legal fees (paid January 15, 2012 to write the partnership agreement)
2,000

COMPREHENSIVE PROBLEMS

1. Calculate the following amounts (show your work).

a. Y's basis in the partnership at February 1, 2012

b. Z's basis in the partnership at February 1, 2012

c. The partnership's basis in the land at February 1, 2012

d. Organizational costs that can be deducted in 2012 (assume amortization over

the shortest period possible)

2. Calculate the following amounts (show your work).

a. Duo's taxable income for 2012

b. The items allocated to Y for 2012

 c. The items allocated to Z for 2012

3. Calculate the following amounts (show your work).

a. Y's basis in the partnership at the end of 2012

b. Z's basis in the partnership at the end of 2012

c. Y's adjusted gross income if her only other source of income during 2012 is
$10,000 interest

Solutions to Comprehensive Problems

1.

a. $100,000, equal to her cash contribution

b. $80,000, equal to his basis in the land contributed

c. $80,000, which is the carryover basis from Z

d. The legal fees are organizational costs. Since the total is less than $5,000, the
entire $2,000 of organizations costs can be deducted in 2012

2.

a. Sales $ 700,000

Cost of goods sold (400,000)

Salaries to employees (150,000)

Payroll taxes for employees (10,000)

Guaranteed payment to Y (51,000)

Operating expenses (150,000)

Organizational expenses (2,000)

Net income (loss) $ (61,000)

b. Net loss ($61,000 × 50%) $30,500.00

Guaranteed payment $51,000.00

Charitable contributions (50%) $10,000.00

c. Net loss ($61,000 × 50%) $30,500.00

 Charitable contributions (50%) $10,000.00

3.

a. Original contribution $100,000.00

Net loss (30,500.00)

Charitable contribution (10,000.00)

Recourse debt (100%) 40,000.00

Nonrecourse debt (50%) 50,000.00

December 31, 2012 basis $149,500.00

b. Original contribution S 80,000.00

Net loss (30,500.00)

Charitable contribution (10,000.00)

Nonrecourse debt 50,000.00

December 31, 2012 basis S 89,500.00

c. Interest income S 10,000.00

Guaranteed payment 51,000.00

Partnership loss (30,500.00)

Adjusted gross income $ 30,500.00

Taxation of Partnerships and Partners

Solutions to Tax Return Problems

The solutions to 9-56 and 9-57 are on the following pages.

9-56 P & K General Partnership Tax Return

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9-57 Slattery's General Partnership Tax Return

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 MARMALADE FOR THE CHARLOTTE.

Weigh three pounds of good boiling apples, after they have been
pared, cored, and quartered; put them into a stewpan with six
ounces of fresh butter, three quarters of a pound of sugar beaten to
powder, three quarters of a teaspoonful of pounded cinnamon, and
the strained juice of a lemon; let these stew over a gentle fire, until
they form a perfectly smooth and dry marmalade; keep them often
stirred that they may not burn, and let them cool before they are put
into the crust. This quantity is for a moderate-sized Charlotte.
 A CHARLOTTE À LA PARISIENNE.

This dish is sometimes called in England a Vienna cake; and it is

known here also, we believe, as a Gâteaux de Bordeaux. Cut
horizontally into half-inch slices a Savoy or sponge cake, and cover
each slice with a different kind of preserve; replace them in their
original form, and spread equally over the cake an icing made with
the whites of three eggs, and four ounces of the finest pounded
sugar; sift more sugar over it in every part, and put it into a very
gentle oven to dry. The eggs should be whisked to snow before they
are used. One kind of preserve, instead of several, can be used for
this dish; and a rice or a pound cake may supply the place of the
Savoy or sponge biscuit.
 A GERTRUDE À LA CREME.

Slice a plain pound or rice cake as for the Charlotte à la

Parisienne, and take a round out of the centre of each slice with a
tin-cutter before the preserve is laid on; replace the whole in its
original form, ice the outside with a green or rose coloured icing at
pleasure, and dry it in a gentle oven; or decorate it instead with
leaves of almond paste, fastening them to it with white of egg. Just
before it is sent to table, fill it with well-drained whipped cream,
flavoured as for a trifle or in any other way to the taste.
 POMMES AU BEURRE.

(Buttered apples. Excellent.)

Pare six or eight fine apples of a firm but good boiling kind, and
core without piercing them through, or dividing them; fill the cavities
with fresh butter, put a quarter of a pound more, cut small, into a
stewpan just large enough to contain the apples in a single layer,
place them closely together on it, and stew them as softly as
possible, turning them occasionally until they are almost sufficiently
tender to serve; then strew upon them as much sifted sugar as will
sweeten the dish highly, and a teaspoonful of pounded cinnamon;
shake these well in and upon the fruit, and stew it for a few minutes
longer. Lift it out, arrange it in a hot dish, put into each apple as
much warm apricot jam as it will contain, and lay a small quantity on
the top; pour the syrup from the pan round, but not on the fruit, and
serve it immediately.
Apples, 6 to 8; fresh butter, 4 oz., just simmered till tender. Sugar,
6 to 8 oz.; cinnamon, 1 teaspoonful: 5 minutes. Apricot jam as
needed.
Obs.—Particular care must be taken to keep the apples entire:
they should rather steam in a gentle heat than boil. It is impossible to
specify the precise time which will render them sufficiently tender, as
this must depend greatly on the time of year and the sort of fruit. If
the stewpan were placed in a very slow oven, the more regular heat
of it would perhaps be better in its effect than the stewing.
 SUÉDOISE OF PEACHES.

Pare and divide four fine, ripe peaches,

and let them just simmer from five to eight
minutes in a syrup made with the third of a
pint of water and three ounces of very white
sugar, boiled together for fifteen minutes; lift
Suédoise of Peaches. them out carefully into a deep dish, and
pour about half the syrup over them, and
into the remaining half throw a couple of
pounds more of quite ripe peaches, and boil them to a perfectly
smooth dry pulp or marmalade, with as much additional sugar in fine
powder, as the nature of the fruit may require. Lift the other peaches
from the syrup, and reduce it by very quick boiling, more than half.
Spread a deep layer of the marmalade in a dish, arrange the
peaches symmetrically round it, and fill all the spaces between them
with the marmalade; place the half of a blanched peach-kernel in
each, pour the reduced syrup equally over the surface, and form a
border round the dish with Italian macaroons, or, in lieu of these, with
candied citron, sliced very thin, and cut into leaves with a small
paste-cutter. A little lemon-juice brings out the flavour of all
preparations of peaches, and may be added with good effect to this.
When the fruit is scarce, the marmalade (which ought to be very
white) may be made in part, or entirely, with nonsuches. The better
to preserve their form, the peaches are sometimes merely wiped,
and then boiled tolerably tender in the syrup before they are pared or
split. Half a pint of water, and from five to six ounces of sugar must
then be allowed for them. If any of those used for the marmalade
should not be quite ripe, it will be better to pass it through a sieve,
when partially done, to prevent its being lumpy.
Large ripe peaches, pared and halved, 4: simmered in syrup, 5 to
8 minutes. Marmalade: peaches (or nonsuches) 2 lbs.; sugar, 1/2 to
3/4 lb.: 3/4 to 1 hour, or more. Strained lemon-juice, 1 tablespoonful.
Citron, or macaroons, as needed.
Peaches, if boiled whole in syrup, 15 to 18 minutes.
 Obs.—The number of peaches can, at pleasure, be increased to
six, and three or four of the halves can be piled above the others in
the centre of the dish.
 AROCĒ DOCĒ (OR SWEET RICE, À LA PORTUGAISE.)

Wash thoroughly, then drain, and wipe dry in a soft cloth, half a
pound of the best Carolina rice. Pour to it three pints of new milk,
and when it has gently stewed for half an hour, add eight ounces of
sugar broken into small lumps, let it boil until it is dry and tender, and
when it is nearly so, stir to it two ounces of blanched almonds,
chopped[163] or pounded. Turn the rice when done into shallow
dishes or soup plates, and shake it until the surface is smooth; then
sift over it rather thickly through a muslin, some freshly-powdered
cinnamon, which will give it the appearance of a baked pudding.
Serve it cold. It will remain good for several days. This is quite the
best sweet preparation of rice that we have ever eaten, and it is a
very favourite dish in Portugal, whence the receipt was derived. One
or two bitter almonds, pounded with the sweet ones, might a little
improve its flavour, and a few spoonsful of rich cream could
occasionally be substituted for a small portion of the milk, but it
should not be added until the preparation is three parts done.
163. The Portuguese use them not very finely chopped.
Rice, 8 oz.; milk, 3 pints: 30 minutes. Sugar, 8 oz.: 1 hour or more.
Pounded almonds, 2 oz.; cinnamon, 1 teaspoonful. Obs.—The rice
must be frequently stirred while boiling, particularly after it begins to
thicken; and it will be better not to add the entire quantity of milk at
first, as from a quarter to half a pint less will sometimes prove
sufficient. The grain should be thoroughly tender, but dry and
unbroken.
 COCOA-NUT DOCE.

This is merely fine fresh lightly grated cocoa-nut stewed until

tender in syrup, made with one pound of sugar to half a pint of water
(or more to the taste) and flavoured with orange-flower water.
 BUTTERED CHERRIES. (CERISES AU BEURRE.)

Cut four ounces of the crumb of a stale loaf into dice, and fry them
a light brown in an ounce and a half of fresh butter; take them up,
pour the butter from the pan, and put in another ounce and a half; to
this add a pound of Kentish cherries without their stalks, and when
they are quite warmed through, strew in amongst them four ounces
of sugar, and keep the whole well turned over a moderate fire; pour
in gradually half a pint of hot water, and in fifteen minutes the
cherries will be tender. Lay the fried bread into a hot dish, pour the
cherries on it, and serve them directly.
Bread, 4 oz.; butter, 1-1/2 oz. Cherries, 1 lb.; butter, 1-1/2 oz.: 10
minutes. Sugar, 4 oz.; water, 1/2 pint: 15 minutes.
Obs.—Black-heart cherries may be used for this dish instead of
Kentish ones: it is an improvement to stone the fruit. We think our
readers generally would prefer to the above Morella cherries stewed
from five to seven minutes, in syrup (made by boiling five ounces of
sugar in half pint of water, for a quarter of an hour), and poured hot
on the fried bread. Two pounds of the fruit, when it is stoned, will be
required for a full-sized dish.
 SWEET MACARONI.

Drop gently into a pint and a half of new milk, when it is boiling
fast, four ounces of fine pipe macaroni, add a grain or two of salt,
and some thin strips of lemon or orange rind: cinnamon can be
substituted for these when preferred. Simmer the macaroni by a
gentle fire until it is tolerably tender, then add from two to three
ounces of sugar broken small, and boil it till the pipes are soft, and
swollen to their full size; drain, and arrange it in a hot dish; stir the
milk quickly to the well-beaten yolks of three large, or of four small
eggs, shake them round briskly over the fire until they thicken, pour
them over the macaroni and serve it immediately; or instead of the
eggs, heat and sweeten some very rich cream, pour it on the drained
macaroni, and dust finely-powdered cinnamon over through a
muslin, or strew it thickly with crushed macaroons. For variety, cover
it with the German sauce of page 403, milled to a light froth.
New milk, 1-1/2 pint; pipe macaroni, 4 oz.; strips of lemon-rind or
cinnamon; sugar, 2 to 3 oz.: 3/4 to 1 hour, or more.
 BERMUDA WITCHES.

Slice equally some rice, pound, or Savoy cake, not more than the
sixth of an inch thick; take off the brown edges, and spread one half
of it with Guava jelly, or, if more convenient, with fine strawberry,
raspberry, or currant jelly of the best quality (see Norman receipt,
478); on this strew thickly some fresh cocoa-nut grated small and
lightly; press over it the remainder of the cake, and trim the whole
into good form; divide the slices if large, pile them slopingly in the
centre of a dish upon a very white napkin folded flat, and garnish or
intersperse them with small sprigs of myrtle. For very young people a
French roll or two, and good currant jelly, red or white, will supply a
wholesome and inexpensive dish.
 NESSELRÔDE PUDDING.

We give Monsieur Carême’s own receipt for this favourite and

fashionable dish, not having ourselves had a good opportunity of
proving it; but as it originated with him he is the best authority for it. It
may be varied in many ways, which the taste or ingenuity of the
reader will easily suggest. Boil forty fine sound Spanish chestnuts
quite tender in plenty of water, take off the husks, and pound the
chestnuts perfectly with a few spoonsful of syrup; rub them through a
fine sieve, and mix them in a basin with a pint of syrup made with a
pound of sugar clarified, and highly-flavoured with a pod of vanilla, a
pint of rich cream, and the yolks of twelve eggs; thicken the mixture
like a boiled custard; when it is cold put it into a freezing pot, adding
a glass of maraschino, and make it set as an iced cream; then add
an ounce of preserved citron cut in dice, two ounces of currants, and
as many fine raisins stoned and divided (all of which should be
soaked from the day before in some maraschino with a little sugar);
the whole thus mingled, add a plateful of whipped cream, and the
whites of three eggs prepared as for Italian meringue. When the
pudding is perfectly frozen, mould it in a pewter mould of the form of
a pine-apple, and place it again in the ice till wanted to serve.
Preserved cherries may be substituted for the raisins and currants.
Chestnuts, 40; syrup, 1 pint some spoonsful; vanilla, 1 pod; cream,
1 pint; yolk of eggs, 12; maraschino, 1 glassful; citron, 1 oz.;
currants, 2 oz.; raisins, 2 oz.; whipped cream, 1 plateful; whites of
eggs beaten to snow, 3.
Obs.—As Monsieur Carême directs the eggs for his Italian
meringues to be prepared as follows, he probably intends that they
should be mixed with the syrup before they are added to the
pudding. Boil together half a pound of the finest sugar, and half a pint
of water, until they begin to be very thick; then, with a wooden spoon,
work the sugar against the side of the pan till it whitens; leave it to
cool a little, work it again, and then with a whisk mingle with it the
eggs whipped to a very firm froth, which ought to produce a
preparation very white, smooth, and brilliant.
 STEWED FIGS. (A VERY NICE COMPOTE.)

Put into an enamelled or a copper stewpan, four ounces of refined

sugar, the very thin rind of a large and fresh lemon, and a pint of cold
water. When the sugar is dissolved, add a pound of fine Turkey figs,
and place the stewpan on a trivet above a moderate fire, or upon a
stove, where they can heat and swell slowly, and be very gently
stewed. When they are quite tender, add to them two glassesful of
port wine, and the strained juice of the lemon; arrange them in a
glass dish, and serve them cold. From two hours to two and a half of
the gentlest stewing will generally be sufficient to render the figs fit
for table. Orange-juice and rind can be used for them at pleasure,
instead of the lemon; two or three bitter almonds maybe boiled in the
syrup to give it flavour, and any wine can be used for it which may be
preferred, but port is best.
This compôte may be served in the second course hot, in a rice-
border; or cold for rice-crust.
 CHAPTER XXIV.

Preserves.

GENERAL REMARKS ON THE USE AND VALUE OF

PRESERVED FRUIT.

Simple well-made preserves—especially those of our early summer

fruits—are most valuable domestic stores, as they will retain through
the entire year or longer,[164] their peculiarly grateful and agreeable
flavour, and supply many wholesome and refreshing varieties of diet
through the winter months and spring. They are, indeed, as
conducive to health—when not cloyingly sweet or taken in excess—
as good vegetables are; and they are inexpensive luxuries (if as
luxuries they must be regarded), now sugar is so very reasonable in
price. By many families they are considered too much as mere
superfluities of the table, and when served only—as they so often
are—combined with rich pastry-crust or cream, or converted into ices
and other costly preparations, may justly be viewed solely in that
light. To be eaten in perfection they should be sufficiently boiled
down to remain free from mould or fermentation, and yet not so
much reduced as to be dry or hard; they should not afterwards be
subjected to the heat of the oven,[165] but served with some plain
pudding, or light dish of bread, rice, ribbon-macaroni, soujee,
semoulina, &c. When intended for tartlets or creams, or fruit-sauces,
for which see Chapter XX., they should be somewhat less boiled,
and be made with a larger proportion of sugar.
164. We have had them excellent at the end of three or four years, but they were
made from the produce of a home garden, as freshly gathered, and carefully
selected as it could be. Some clear apricot-marmalade, some strawberry-
jelly, and some raspberry-jelly, were amongst those which retained their full
flavour and transparency to the last. They were merely covered with two
layers of thin writing paper pressed closely on them, after being saturated
with spirits of wine.

165. For the manner of serving them in pastry without this, see “small vol-au-vents
and tartlets,” Chap. XVIII.

Fruit steamed in bottles is now vended and consumed in very

large quantities in this country, but it is not wholesome, as it
produces often—probably from the amount of fixed air which it
contains—violent derangement of the system. When the bottles are
filled with water it is less apt to disagree with the eaters, but it is
never so really wholesome as preserves which are made with sugar.
That which is baked keeps remarkably well, and appears to be
somewhat less objectionable than that which is steamed.
The rich confectionary preparations called wet preserves (fruits
preserved in syrup), which are principally adapted to formal desserts,
scarcely repay the cost and trouble of making them in private
families, unless they be often required for table. They are in general
lusciously sweet, as they will only remain good with a large
proportion of sugar; and if there be no favourable place of storage for
them they soon spoil. When drained and well dried, they may much
more easily be kept uninjured. The general directions for them,
which we append, and the receipts for dried gooseberries, cherries,
and apricots which we have inserted here will be sufficient for the
guidance of the reader who may wish to attempt them.

Fourneau
Economique, or
Portable French
Furnace, with
Stewpan and Trivet.
No. 1. Portable
French Furnace.—2.
Depth at which the
grating is placed.—3.
Stewpan.—4.
Trivet.

The small portable French stove, or furnace, shown in the

preceding page, with the trivet and stewpan adapted to it, is
exceedingly convenient for all preparations which require either more
than usual attention, or a fire entirely free from smoke; as it can be
placed on a table in a clear light, and the heat can be regulated at
pleasure. It has been used for many
of the preserves of which the receipts
are given in this chapter, as well as for
various dishes contained in the body
of the work. There should always be a
free current of air in the room in which
it stands when lighted, as charcoal or
braise (that is to say, the live embers
of large well-burned wood, drawn from
an oven and shut immediately into a
closely-stopped iron or copper vessel Closed Furnace and Cover.
to extinguish them) is the only fuel
suited to it. To kindle either of these,
two or three bits must be lighted in a
common fire, and laid on the top of that in
the furnace, which should be evenly placed
between the grating and the brim, and then
blown gently with the bellows until the
whole is alight: the door of the furnace must
in the mean while be open, and remain so,
unless the heat should at any time be too
fierce for the preserves, when it must be
closed for a few minutes, to moderate it. To
Grating.
extinguish the fire altogether, the cover
must be pressed closely on, and the
door be quite shut: the embers which
remain will serve to rekindle it easily,
but before it is again lighted the
grating must be lifted out and all the
ashes cleared away. It should be set
by in a place which is not damp. In a Trevet.
common grate a clear fire for
preserving may be made with coke, which is a degree less
unwholesome than charcoal.
The enamelled stewpans which have now come into general use,
are, from the peculiar nicety of the composition with which they are
lined, better adapted than any others to pickling and preserving, as
they may be used without danger for acids; and red fruits when
boiled in them retain the brightness of their colour as well as if
copper or bell-metal were used for them. The form of the old-
fashioned preserving-pan, made usually of one or the other of these,
is shown here; but it has not, we should say, even the advantage of
being of convenient shape; for the handles quickly become heated,
and the pan, in consequence, cannot always be instantaneously
raised from the fire when the contents threaten to over-boil or to
burn.
It is desirable to have three or four
wooden spoons or spatulas, one fine hair-
sieve, at the least, one or two large squares
of common muslin, and one strainer or
more of closer texture, kept exclusively for
preparations of fruit; for if used for other
purposes, there is the hazard, without great
Copper preserving- care, of their retaining some strong or
pan. coarse flavour, which they would impart to
the preserves. A sieve, for example, used
habitually for soup or gravy, should never,
on any account, be brought into use for any kind of confectionary,
nor in making sweet dishes, nor for straining eggs or milk for
puddings, cakes, or bread. Damp is the great enemy, not only of
preserves and pickles, but of numberless other household stores;
yet, in many situations, it is extremely difficult to exclude it. To keep
them in a “dry cool place” (words which occur so frequently both in
this book, and in most others on the same subject), is more easily
directed than done. They remain, we find, more entirely free from
any danger of moulding, when covered with a brandied paper only,
and placed on the shelves of a tolerably dry store-room, or in a
chiffoneer (in which we have had them keep unchanged for years).
When the slightest fermentation is perceptible in syrup, it should
immediately be boiled for some minutes, and well skimmed; the fruit
taken from it should then be thrown in, and well scalded also, and
the whole, when done, should be turned into a very clean dry jar; this
kind of preserve should always be covered with one or two skins or
with parchment and thick paper when it is not secured from the air
with corks.