Ali, a Contractor, Builds an Office Building for a Construction

question 82

Multiple Choice

Ali, a contractor, builds an office building for a construction partnership in exchange for a capital and profits interest in the partnership worth $500,000. Which of the following statements is correct?

• A)Ali recognizes $500,000 of ordinary income and the partnership can deduct $500,000 in the current year.
• B)Ali recognizes no income and the partnership can deduct nothing in the current year.
• C)Ali recognizes $500,000 ordinary income and the partnership deducts the $500,000 over the building's MACRS recovery period as a depreciation expense.
• D)Ali recognizes ordinary income in the current year in an amount equal to the depreciation deduction the partnership claims this year for the $500,000 capitalized amount.

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Definitions:

Cognitive Functioning

The mental processes involved in gaining knowledge and comprehension, including thinking, knowing, remembering, and problem-solving.

Disturbed Personal Identity

A psychological state in which an individual experiences confusion or uncertainty about their own identity or sense of self.

Childhood Abuse

Any form of physical, emotional, sexual, or neglectful treatment of a child that results in harm or trauma.

Cognitive Distortions

Irrational, exaggerated or biased ways of thinking that can lead to negative emotions and behaviors.