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.

---

Definitions:

Heterotrophs

Organisms that cannot produce their own food and rely on consuming other organisms for energy and nutrients.

Organ System

An organized group of tissues and organs that work together to perform a specialized set of functions (e.g., the digestive system or circulatory system).

Mobile

Capable of moving or being moved freely or easily.

Freshwater

Water that contains minimal amounts of dissolved salts, found in rivers, lakes, and streams, supporting a diverse range of plants and animals.