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:

Kohlberg's Theory

The psychological theory developed by Lawrence Kohlberg that suggests moral reasoning progresses through a series of developmental stages.

Personal Relationships

Interpersonal affiliations or associations formed between two or more individuals based on affection, trust, cooperation, or other social bonds.

Society

A structured community of people bound together by similar traditions, institutions, or nationality.

Kohlberg

Refers to Lawrence Kohlberg, a psychologist known for his theory of moral development, which suggests that moral reasoning develops in six stages.