Identify Which of the Following Statements Is True

question 67

Multiple Choice

Identify which of the following statements is true.

• A) When a partnership assumes a liability on property contributed by a partner, the only effect on the contributing partner's basis in his or her partnership interest is that his or her basis will be increased by the amount of the liability assumed by the other partners.
• B) A contribution of services for a partnership interest is a tax- free transaction.
• C) For federal income tax purposes, formation of a partnership is governed by Sec. 721.
• D) All of the above are false.

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Definitions:

Return On Investment

A gauge of an investment's profit, expressed as the return percentage in comparison to the cost of the investment.

Residual Income

Residual income is the profit remaining after deducting all required costs of capital from operating income.

Margin

Typically refers to the difference between the selling price of a product and its cost, used to measure profitability.

Turnover

The rate at which inventory or assets are sold and replaced or the rate at which employees are replaced in a business.