Identify Which of the Following Statements Is False

question 30

Multiple Choice

Identify which of the following statements is false.

• A) The BB Partnership wants to make a special allocation of $10,000 of long- term capital gain to Bob and a special allocation of $10,000 of ordinary income to Briana. This allocation will have a substantial economic effect.
• B) Partners must make up negative balances in their capital accounts upon liquidation of the partnership.
• C) Jean and Blossom form an equal partnership. Jean contributes $10,000 cash and Blossom contributes property with a $10,000 FMV and a $5,000 basis. When the partnership sells the property contributed by Blossom for $10,000 shortly after the formation, Blossom must include the $5,000 gain in her income.
• D) In order to shift income/loss between partners, there must be substantial economic effect.

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Definitions:

Financial Statement Footnotes

Detailed explanations and additional information provided at the bottom of financial statements, clarifying specific line items.

Two-Statement Approach

A financial reporting method where income tax effects of items reported outside the income statement are recognized directly in equity instead of income statement.

Unrealized Gains

Profits that have been achieved on paper from investments but have not yet been realized through selling the investment.

Other Comprehensive Income (OCI)

Income that is not included in net income, including items that are not realized or not reflected in earnings.