Identify Which of the Following Statements Is True

question 9

Multiple Choice

Identify which of the following statements is true.

• A) If all tax- exempt interest income is distributed when received by a partnership, the partners' bases are the same after the distribution as they were before the tax- exempt interest was received by the partnership.
• B) A partner's basis for his or her partnership interest is increased by his or her share of the partnership's tax- exempt income.
• C) A general partner's share of recourse debt is based on his or her economic risk of loss, and his or her share of nonrecourse debt is predominantly based on his or her share of partnership profits.
• D) All of the above are true.

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Definitions:

Net Profit

The amount of income that remains after subtracting all expenses, taxes, and costs from total revenue.

Monetary Items

Assets and liabilities that are to be received or paid in a fixed or determinable amount of money.

Payables

Amounts that a company owes to its creditors or suppliers for goods or services received.

Borrowings

Funds that a company or individual takes on loan from another party, to be repaid over time with interest.