Emma Contributes Property Having a $24,000 FMV and a $15,000

question 1632

Multiple Choice

Emma contributes property having a $24,000 FMV and a $15,000 adjusted basis and also renders legal services valued at $22,000 in exchange for a 30% interest in the capital and profits of the ABC partnership. The tax results to Emma will be

• A) no income is recognized and a partnership basis of $37,000.
• B) ordinary income of $22,000 and a partnership basis of $37,000.
• C) no income is recognized and a partnership basis of $46,000.
• D) ordinary income of $22,000 and a partnership basis of $46,000.

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Definitions:

Ordinal Utility Functions

A representation of a consumer's preference ranking for different bundles of goods, without specifying the exact level of satisfaction.

Basic Assumptions

Foundational beliefs or principles that are accepted as true without proof, forming the basis of further argument or reasoning.

Indifference Curve

A graph showing different combinations of two goods that provide equal satisfaction and utility to a consumer.

Marginal Rates of Substitution

The speed at which a buyer is prepared to sacrifice one item for another while keeping their satisfaction constant.