Identify Which of the Following Statements Is True

question 9

Multiple Choice

Identify which of the following statements is true.

• A)Although a partner's basis in the partnership cannot go below zero, a partner's book capital account (equity)may be negative.
• B)Tom purchased for cash a 40% capital, profits, and loss interest in the TP General Partnership. His $140,000 basis in his partnership interest includes his $45,000 share of recourse debt and his $30,000 of nonrecourse debt (that is not qualified nonrecourse real estate financing). His at-risk basis cannot be more than $65,000.
• C)Terri is a limited partner in the STU Partnership, which manufactures children's toys. Because the partnership is actively involved in a trade or business, Terri's income from the partnership is classified as active income for the passive activity loss rules.
• D)All of the above are false.

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Definitions:

Remedy

A means of legal reparation or correction, often involving compensation or specific performance to address a wrong or enforce a right.

Corporate Stocks

Shares of ownership in a corporation, representing a claim on part of the company's assets and earnings.

Bonds

Fixed-income securities representing a loan made by an investor to a borrower, typically corporate or governmental, with predefined terms of repayment and interest.

Indefiniteness

A legal term referring to the lack of clarity in the terms of a contract or patent that can lead to its unenforceability or invalidity.